Inslaw/PROMIS Bua Report

REPORT OF SPECIAL COUNSEL

NICHOLAS J. BUA
TO

THE ATTORNEY GENERAL
OF THE UNITED STATES

REGARDING THE ALLEGATIONS OF INSLAW, INC.

NICHOLAS J. BUA

HELENE B. GREENWALD
JOSEPH H. HARTZLER
CHARLES D. KNIGHT
DEAN J. POLALES
DAVID S. ROSENBLOOM

March 1993

THIS DOCUMENT HAS BEEN REVISED
IN ORDER TO DELETE MATERIAL
THE DISCLOSURE OF WHICH IS
PROHIBITED PURSUANT TO
RULE 6 (e) OF THE FEDERAL
RULES OF CRIMINAL PROCEDURE

TABLE OF CONTENTS

Page

I . INTRODUCTION

1

II. THE HISTORY OF INSLAW'S ALLEGATIONS 3

A. The Brewer Bias Theory 4

B . The Conspiracy Allegations 6

C. Additional Allegations 10

III. SUMMARY OF OUR CONCLUSIONS

13

IV. THE DEVELOPMENT OF INSLAW'S CLAIMED PROPRIETARY

SOFTWARE 15

A. History of Inslaw 15

b. Negotiation of the 1982 Implementation Contract . . 18

C. Early Proprietary Rights Disputes 21

D. The Advance Payments Dispute 24

E. The Events Leading Up To Modification 12 25

F. Inslaw's Efforts to Identify the Proprietary

Enhancements 32

G. The Effect of The Bankruptcy Court's Findings ... 36

V.

THE ALLEGATION OF A CONSPIRACY TO STEAL PROMIS 39

A. The Claimed Direct Evidence Of A Conspiracy ..... 41

1. Michael Riconosciuto . 42

a. summary of Riconosciuto' s Allegations . . 42

{i) Riconosciuto' s Calls To The

Hamiltons 43

(ii) Riconosciuto' s March 21, 1991

Affidavit 44

{ i i i ) Riconosciuto' s Statement to

Congress 46

(iv) Riconosciuto' s Testimony At His

Trial 47

b. The Inconsistencies within The

Allegations 49

c. Results Of Our investigation 53

{ i ) The Wackenhut-Cabazon Joint

Venture 55

{ii) The September 10, 1981 weapons

Demonstration 61

{ i i i ) Riconosciuto' s March 29, 1991

Arrest 66

Material' Omitted Pursuant

2 .

3.

Ari Ben-Menashe '\ Pe . d « R .*' ^

a. Ben-Menashe 1 s Previous Allegations ... 73

b. Our Investigation 75

Charles Hayes 81

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B. The Claimed Circumstantial Evidence Of A

Conspiracy 85

1. The Alleged Call From Dominic Laiti 87

2. The 1983 Laiti Trip To New York 87

a. Earl Brian 88

b. Dominic Laiti 88

c. Paul Wormeli 88

d. Marilyn Titus 90

e. Mark Kesselman ' 90

3. The 53rd Street Ventures Connection 91

a. Daniel Tessler 92

b. Richard D'Amore 95

c. Patricia Cloherty 95

4. The Jonathan Ben Cnaan Allegations 97

5. The Edward Hurley Overtures 98

6. The Accumenics Contract Award 100

7. The Alleged Videnieks /Hadron Connection . . . 101

8. The Attempted Purchase of Inslaw By SCT . . . 104

9. The Lois Battistoni Allegations 106

a. Lois Battistoni . 106

b. Charles Trombetta 1 . . . . 109

c. Garnett Taylor 109

d. James Walker Ill

e. Floyd Bankson 112

10. Ronald LeGrand 113

C. Conclusion Regarding The Alleged Earl Brian

Connection 121

VI. THE ALLEGATION THAT DOJ OBTAINED AN ENHANCED

VERSION OF PROMIS THROUGH FRAUD AND DECEIT 124

A. The Advance Payments Dispute 127

B. DOJ's Demand For a Copy Of PROMIS 129

C. DOJ's Original Demand Was Not For Enhanced PROMIS . 133

D. DOJ's Conduct After Modification 12 136

VII. THE ALLEGATION THAT DOJ WRONGFULLY DISTRIBUTED PROMIS . 141

A. A Comparison of FOIMS and PROMIS 141

1. The Allegation that FOIMS is Pirated From

PROMIS 141

2. Our Investigation . 143

B. DOJ's Self -Installation of PROMIS 147

C. The Alleged International Distribution of PROMIS by

DOJ 150

VIII. THE ALLEGATION THAT DOJ OBSTRUCTED THE

REAPPOINTMENT OF BANKRUPTCY JUDGE BASON 153

A. The Selection Process 155

1 . The Vacancy 155

2. The Merit Selection Panel 155

3. The Panel's Consideration of the Inslaw

Ruling 156

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a. AUSA reported inslaw ruling to Civil

Division Chief 157

b. Royce Lambreth reported inslaw ruling to

Judge Johnson 160

c. The Panel considered the inslaw ruling . 162

d. Our Conclusions Regarding Lambreth' s

Communication With Judge Johnson .... 163

4. Opposition to Bason From Outside DOJ 166

5. The Other Possible Opposition Effort 169

6. The Panel's Recommendation 171

7. The Judicial Council's Recommendation .... 171

8. The Selection By the Court of Appeals .... 172

9. The Confidential Memorandum 172

B. The Initial Allegation 175

C. DOJ's Motion to Recuse Bason 176

1. Prior Consideration of a Recusal Motion . . . 176

2. Letter to Wald as Basis for Recusal 177

3. House Judiciary Committee's Implied

Criticism 179

D. Bason's Lawsuit 180

E. More Detailed Allegations 181

1. The Overheard Remark of a DOJ Attorney .... 181

2. Repprter Chris Welles 182

3. Stuart Schiffer 182

4. Judge Tim Murphy 184

5. Kevin Reynolds /William Hamilton 185

6. William Hamilton/Garnett Taylor . 186

F. Conclusion 188

IX. THE ALLEGATION THAT DOJ OFFICIALS TRIED TO CONVERT
INSLAW'S BANKRUPTCY TO A LIQUIDATION, AND THEN
COMMITTED PERJURY AND FIRED A WHISTLEBLOWER TO COVER
UP THIS MISCONDUCT 190

A. Background 190

1. The Primary Allegation 191

2. The Cover-Up Allegations 193

3. The Bankruptcy Court Decision 194

4. The OPR Investigation 196

5. The Public integrity Investigation 198

6. The Senate Subcommittee's Investigation . . . 200

7. The House Judiciary Committee investigation . 202

B. Our Analysis 203

1. Brewer's Conversation with Stanton 203

2. Pasciuto's Allegation that Stanton Pressured

White to Convert the Inslaw Case 204

3. The Videnieks' Notes 211

4. McKain's Testimony 212

5. White's Addition to Confidentiality Order . . 214

6. Cornelius Blackshear 215

7. Stanton's Consideration of Transferring

Harry Jones 224

C. Conclusion 226

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1. The Alleged Scheme To Convert 227

2. The Alleged Cover-up 229

a. Blackshear's Recantation 229

b. Pasciuto's Termination 230

X. DOJ'S RESPONSES TO CONGRESSIONAL INVESTIGATIONS .... 232

A. Allegation that DOJ's Objections Created Delays . . 232

B. Allegation that DOJ violated Conflict of interest

Principles 235

C. Question of whether DOJ Destroyed Documents. . . . 237

D. Allegation that DOJ interfered with the House

Committee's interview of Riconosciuto 242

XI. REMAINING ALLEGATIONS ' 244

A. Allegations Concerning Dickstein, Shapiro & Morin . 244

B. The Death of Joseph Daniel Casolaro 246

C. The Alleged Sham Contract Disputes 250

D. Response Of DOJ To Claims of Brewer Bias 256

E. Inslaw's Proof Of Private Financing 261

XII. CONCLUSIONS 264

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I.

INTRODUCTION

On November 7, 1991, Attorney General william Barr appointed
me to serve as a Special Counsel for the purpose of investigating
all allegations of wrongdoing in connection with what has come to
be known as the Inslaw matter. The Attorney General requested that
I conduct a complete and thorough investigation, and determine
whether there had been any misconduct by any individuals, either
inside or outside the Department of Justice. The Attorney General
told me that my investigation should be completely independent, and
assured me that he would demand complete cooperation with my
investigation by all Department of Justice employees.

I selected six Assistant united States Attorneys, all with
significant criminal prosecution experience, and one of my law
partners, to assist me in my investigation. 1 Together, my
assistants and I selected two seasoned and highly regarded Special
Agents from the FBI to work as our investigators. For purposes of
this investigation, the Assistant U.S. Attorneys and the FBI agents
reported solely to me, and to nobody else within the Department of
Justice ("DOJ").

During the past year we have devoted considerable resources to
investigating the myriad allegations that have been made about the
conduct of DOJ employees, and others, in connection with the

: One of the Assistant United States Attorneys I originally
selected resigned from my staff after he was appointed Chief of the
Public integrity Section of the criminal Division of the Department
of Justice. We agreed that resignation was appropriate in order to
maintain the independence of this investigation. In addition,
Thomas M. Durkin, the former First Assistant United States Attorney
for the Northern District of Illinois resigned from my staff when
he entered private practice in February 1993.

administration of a contract between DOJ and Inslaw . At times,
this has been a daunting task. The allegations in this case seem
to know no bounds. They literally range from charges of murder and
international espionage to claims of simple incompetence. In
investigating these allegations, we necessarily had to assign
priorities to our tasks. We have for the most part completed our
investigation regarding what we consider be the most serious
allegations. As is described more specifically elsewhere in this
report, there remain a few areas where we have not completed our
investigation. Our preliminary review of these remaining areas,
however, leads us to believe that it is unlikely that we will find
evidence that would affect the tentative conclusions set out in
this report. We are forwarding our conclusions to you now in order
to allow you to determine how you wish to proceed in this matter. 2

2 During our investigation we subpoenaed several third party
witnesses to appear before a grand jury in the Northern District of
Illinois. Matters occurring before the grand jury are described in
several places in this report. Pursuant to Rule 6(e) of the
Federal Rules of Criminal Procedure, those matters cannot be
disclosed without leave of the Chief Judge of the district court.
Consequently, unless and until that authorization is obtained, we
will be taking the customary precautions to preserve the
confidentiality of this report and the matters discussed herein.

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II. THE HISTORY OF INSLAW'S ALLEGATIONS

Inslaw has made essentially two kinds of allegations against
DOJ concerning the reasons for its contract disputes with the
Department. First, inslaw has argued that C. Madison "Brick"
Brewer, the DOJ official principally in charge of the PROMIS
implementation contract for the Executive Office of the United
States Attorneys (EOUSA) , was biased against inslaw because Brewer
had been fired by Inslaw’s President several years before. Under
this theory. Brewer’s alleged bias was the motivating factor behind
a series of contract disputes between inslaw and DOJ. Those
disputes were allegedly engineered or exploited by Brewer, and by
those DOJ employees subject to his influence and control, in order
to harm inslaw and its president, William Hamilton. This is the
theory Inslaw advanced in its complaint and its trial presentation
in the adversary proceeding in its bankruptcy case.

In addition to the Brewer bias theory, inslaw has also
advanced a theory that DOJ's disputes with Inslaw were the result
of a far wider conspiracy or conspiracies, most of which
purportedly sought to appropriate Inslaw's software for the benefit
of Earl Brian, a private businessman alleged to have ties to
officials of the Reagan administration.

Although the two kinds of theories proposed by inslaw are not
mutually exclusive, there is some tension between the two and each
theory has a somewhat different evolution. Consequently, the
histories of the two theories are discussed separately in this
report.

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A.

The Brewer Bias Theory

Brewer started his duties at the eousa in January 1982. The
PROMIS implementation contract with Inslaw was signed in March 1982
after at least one negotiating session in which Brewer
participated. Inslaw first began complaining about Brewer's
alleged bias in May 1982, after a meeting in which Brewer
criticized Inslaw. Inslaw maintained that Brewer was biased
against the company and its President, William Hamilton, because
Brewer had been "fired" as the General Counsel of inslaw' s
predecessor, the institute for Law and Social Research. inslaw
repeated the charge of Brewer's bias against the company at various
times and to various people within DOJ throughout the term of the
contract.

in February 1985 inslaw filed for relief under Chapter 11 of
the Bankruptcy Code. Thereafter, the parties attempted to reach a
settlement of their contract disputes, and Inslaw again renewed its
charges that Brewer was biased and should be removed from
.participation in the negotiations. Although Brewer was removed
from direct participation in the negotiations, the parties were
unable to reach an accord. In June 1986 inslaw filed its adversary
complaint against DOJ. In its complaint, inslaw charged, and
Bankruptcy Judge Bason subsequently found, that DOJ, infected by
Brewer's bias and hatred of inslaw, obtained Inslaw's proprietary
PROMIS software by the use of "fraud, trickery and deceit." inslaw
argued that Brewer was permitted to wage his personal vendetta
against Inslaw by Deputy Attorney General D. Lowell Jensen. Inslaw

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alleged that because of his personal involvement in the development
of competing computer software, Jensen disliked PROMIS and was
hostile toward Inslaw.

in February 1987, in its so-called request for "independent
handling, " Inslaw again charged that Brewer was biased against
inslaw, and suggested that his bias had hampered the efforts of
Inslaw to settle its claims against DOJ. :) Although an extensive
hearing was held on the "independent handling" application, no
substantial evidence was presented at that time about Brewer's
alleged bias against the company. Nor was Brewer called as a
witness at the hearing. Nevertheless, at the conclusion of the
hearing, and immediately before commencing the hearing on the
adversary complaint, Bankruptcy Judge Bason issued his oral
findings and conclusions on the "independent handling" matter. In
his findings. Bankruptcy Judge Bason stated that he believed Brewer
had obtained a commitment from the Executive Office of United
States Trustees to have the Inslaw case converted from a Chapter 11
reorganization to a Chapter 7 liquidation. In explaining his
reasons for believing that a conspiracy to convert the case
existed, Bankruptcy Judge Bason explained:

The picture becomes even more clear if we
go on the supposition, as alleged by INSLAW,
and as is the subject of --or one of the issues

3 In its "independent handling" petition. Inslaw requested that
the court establish "a means whereby the Justice Department will
conduct [the Inslaw] Adversary Proceeding . . . completely and
entirely independent of any Department of Justice officials
involved in the allegations made in said Adversary Proceeding."
The independent handling proceedings are discussed in greater
detail in Part IX of this report.

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involved in a separate adversary proceeding.

Inslaw against DOJ. If we go on the
supposition that it was not simply the
interests of DOJ as an institution that
motivated Mr. Brewer and perhaps others in the
Department of Justice, but, instead, there was
a personal vendetta against INSLAW, when
someone is engaged in a personal vendetta,
then obviously, that person would desire to
put the company out of business rather than
desire to preserve them as a going concern.

When he announced his findings after the trial of Inslaw's
adversary proceeding. Bankruptcy Judge Bason, this time after
having the opportunity to see Brewer on the stand, reached
essentially the same conclusion about the cause of the inslaw-DOJ
disputes. According to the Bankruptcy Court's findings. Brewer
devised and implemented a strategy to ruin Inslaw because of his
intense hatred of Inslaw. The Bankruptcy Judge found that Brewer's
bias affected not only his own conduct, but also the conduct of
other DOJ personnel with day to day responsibility for the Inslaw
contract. He said that DOJ's Contracting Officer and the EOUSA
Assistant Director for information Systems "were infected by
Brewer's poisonous attitude towards Hamilton and Inslaw, and they
aided and assisted Brewer in his wrongful efforts to injure
Inslaw." Bankruptcy Judge Bason also concluded that D. Lowell
Jensen's biased attitude toward Inslaw contributed to the situation
in which Inslaw’s complaints about Brewer and the administration of
the PROMIS implementation contract went unheeded.

B . The Conspiracy Allegations

In early 1988, after Bankruptcy Judge Bason announced his
findings and conclusions in Inslaw's adversary proceeding. Inslaw

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ri

advanced a new theory about the origins of its disputes with DOJ.
Under this new theory. Inslaw's difficulties with DOJ were the
result of a high level conspiracy to "steal" promis for the benefit
of Earl Brian. Although there were a number of subplots and
elements to this theory, it was well summarized by Inslaw in a
pleading it subsequently filed with the United States District
Court for the District of Columbia which described "a conspiracy
among friends of Attorney General Meese to take advantage of their
relationship with him for the purpose of obtaining a lucrative
contract for the automation of the Department's litigating
divisions" :

The combination of high-level hostility and
lower- level vindictiveness does not
sufficiently account for the persistence and
tenacity of the attempts to wrest control of
PROMIS from INSLAW. These began with DOJ's
refusal to recognize INSLAW's ownership of
enhanced PROMIS. Then came an offer from
Hadron, Inc., a software company controlled by
a long-time friend of Edwin Meese, to buy
INSLAW. When Hamilton refused the offer, the
chairman of Hadron said, "We have ways of
making you sell." Soon thereafter a New York-
based venture capital firm, following a
meeting with a businessman who claimed to have
access to the highest levels of the Reagan
administration, tried to induce the Hamiltons
to turn over to the firm their voting rights
in INSLAW's common stock, when the contract
disputes forced INSLAW to seek the protection
of Chapter 11, Stanton attempted to push
INSLAW into liquidation. After this failed,

DOJ officials encouraged a Pennsylvania -based
computer services company to launch a hostile
takeover bid for INSLAW.

in September 1989 the Permanent Subcommittee on Investigations
of the Committee on Governmental Affairs of the United States
Senate, which had investigated many of Inslaw's conspiracy

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allegations, issued a Staff Study. Briefly, the Staff Study found
no proof that Attorney General Meese, Deputy Attorney General
Jensen, or other Justice Department officials were involved in a
conspiracy to ruin Inslaw or to steal the PROMIS software.
Similarly, the Staff found no proof that Earl Brian or any company
in which he had an interest was involved in a conspiracy to take
over Inslaw. The Staff Study also found no proof that inslaw' s
problems were related in any way to the DOJ "Project Eagle"
procurement.

Following the release of the Senate's Staff Study in September
1989 (and the almost simultaneous decision of the Court of Appeals
for the District of Columbia Circuit to deny Inslaw's request for
appointment of independent counsel) , Inslaw petitioned the District
Court for the District of Columbia for a writ of mandamus to compel
DOJ to conduct a criminal investigation of its allegations. The
district court denied the petition in September 1990.

Soon after the denial of its petition. Inslaw returned to
court seeking to reopen discovery in the bankruptcy proceedings in
order to investigate whether DOJ had violated the Bankruptcy
Court's injunction prohibiting DOJ from distributing Inslaw's
enhanced version of the PROMIS software. In a series of papers
filed to persuade the court to reopen discovery. Inslaw began to
advance allegations of a broader conspiracy involving Earl Brian's
alleged distribution of the proprietary PROMIS software. In
general, these allegations involved not just the unlawful
appropriation of Inslaw's enhanced PROMIS by DOJ for its own

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internal uses or as part of an unsuccessful plot to benefit Earl
Brian, but the actual distribution of enhanced PROMIS to other
government agencies and internationally.

For example. Inslaw cited an article quoting a man named
Charles Hayes as expressing his opinion that PROMIS was then being
used at more than 200 locations throughout the federal government.
Inslaw also filed with the court affidavits of Ari Ben-Menashe, in
which Ben-Menashe implicated Earl Brian in the international
distribution of PROMIS. By 1991, apparently based upon information
provided to it by Michael Riconosciuto, Inslaw appears to have
adopted the claim that Earl Brian was "given" the right to sell
PROMIS by the Reagan administration. Under this theory, Brian was
awarded the right to sell PROMIS as a reward for his participation
in a plot by which supporters of then candidate for President,
Ronald Reagan, allegedly made agreements with representatives of
the Iranian government to delay the release of American hostages
held in Iran until after the Presidential election {the so-called
"October Surprise") .

Inslaw's request for additional discovery was ultimately
mooted by the U.S. Court of Appeals' decision holding that the
Bankruptcy Court lacked jurisdiction over inslaw's claims against
DOJ. United States v. Inslaw, Inc. . 932 F.2d 1467 (D.C. Cir.
1991), cert, denied , 112 S. Ct. 913 (1992). The allegations of a
conspiracy involving the actual distribution of Inslaw's
proprietary software are discussed, along with other allegations,
in the September 10, 1992, Investigative Report of the U.S, House

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of Representatives Committee on the Judiciary entitled "The Inslaw
Affair" (hereinafter the "House Committee Report"). The House
Committee Report, however, does not reach any definitive factual
findings regarding these allegations. Instead, the Report, for the
most part, simply reports the various allegations that Inslaw has
made and concludes that additional investigation is warranted.

C. Additional Allegations

These, then, are the two major allegations made by Inslaw: a
personal vendetta and plan to ruin Inslaw motivated by Brewer's
intense hatred of the company, and a far-reaching, high-level
conspiracy to appropriate Inslaw's software. But these are not the
only allegations. Over the course of the long disputes between
Inslaw and DOJ many subsidiary allegations have surfaced which we
have also investigated as described in this report.

As mentioned earlier, during the course of the bankruptcy
proceedings Inslaw alleged that DOJ improperly attempted to force
the U.S. Trustee to convert the bankruptcy case from a
reorganization to a liquidation proceeding. Inslaw also claimed
that when the plot was revealed, others suborned or committed
perjury to attempt to conceal DOJ's actions and DOJ fired the
"whistleblower" who first disclosed the scheme. During and after
the bankruptcy proceedings, inslaw has alleged that not only did
DOJ plot to steal its software, but it has also improperly used and
distributed that software.

Following the oral announcement of his decision that DOJ
obtained Inslaw's software by "fraud, trickery and deceit,"

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Bankruptcy Judge Bason learned that he had not been reappointed to
a second term on the Bankruptcy Court by the Court of Appeals for
the D.C. Circuit. This led to claims by Inslaw and others that DOJ
must have improperly exercised its influence to obstruct Bason's
reappointment .

As noted above, the number and seriousness of Inslaw's
allegations against DOJ led to two Congressional investigations,
one in the Senate and the other in the House of Representatives.
The propriety of DOJ's conduct in connection with the Congressional
inquiries has, in turn, been questioned. It has been suggested
that DOJ unduly delayed the Congressional investigations, violated
conflict of interest principles in connection with its
representation of DOJ employees who appeared before Congress to
testify, failed to produce, and perhaps even destroyed, documents
requested during those inquiries, and interfered with Congressional
attempts to interview one Congressional witness who was also the
subject of a federal criminal prosecution.

These are the allegations to which we devoted the bulk of our
investigative efforts. It does not, however, exhaust the list of
allegations against DOJ. For example, there have been suggestions
by Inslaw and others of DOJ's involvement in the death of a free-
lance journalist who was examining Inslaw's claims. There have
been claims that DOJ improperly exerted pressure upon Inslaw's own
attorneys to force them to abandon Inslaw's claims. We have not
thoroughly investigated each and every one of these remaining
allegations, but we have reviewed the records and prior

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investigations that have been made of the allegations in order to
assure ourselves that there is little likelihood that additional
investigation will discover substantial evidence of criminal or
other intentional misconduct by DOJ. Our discussion of these
remaining allegations appears in one of the final sections of this
report .

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III. SUMMARY OF OUR CONCLUSIONS

Based on all the evidence we obtained and reviewed during our
investigation, we reached the following conclusions. The reasons
for our conclusions are set forth in detail in later sections of
this report.

There is no credible evidence to support the allegation that
members of DOJ conspired with Earl Brian to obtain or distribute
PROMIS software. The overwhelming weight of the evidence is that
there was absolutely no connection between Earl Brian and anything
related to Inslaw or PROMIS software.

There is woefully insufficient evidence to support the
allegation that DOJ obtained an enhanced version of PROMIS through
"fraud, trickery, and deceit," or that DOJ wrongfully distributed
PROMIS within or outside of DOJ. To the contrary, we are convinced
that DOJ employees undertook actions with respect to Inslaw that
they genuinely believed were in the best legitimate interests of
the government.

We also find that DOJ conducted itself properly after it
became involved in litigation with Inslaw.

we find that there is no credible evidence that DOJ employees
sought to improperly influence the selection process that resulted
in the decision not to reappoint Bankruptcy Judge Bason.

We find that there is insufficient evidence to support the
allegations that DOJ employees attempted to improperly influence
the U.S. Trustee to convert the inslaw bankruptcy case, or that DOJ
employees committed perjury in order to hide this obstruction.

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Finally, we find that there is no evidence to support the
allegation that DOJ employees destroyed any documents related to
Inslaw or otherwise acted improperly in order to obstruct
Congressional investigations into Inslaw's allegations.

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IV. THE DEVELOPMENT OF INSLAW’S CLAIMED PROPRIETARY SOFTWARE

Most of Inslaw's allegations of wrongdoing focus on alleged
attempts to steal its property, specifically, an enhanced version
of PROMIS software to which Inslaw claims ownership. it is
undisputed that certain versions of PROMIS are in the public
domain. Inslaw has consistently asserted, however, that it
maintains proprietary rights in the enhanced version of PROMIS it
developed after it became a for-profit enterprise. Because one of
the central areas of disagreement between DOJ and Inslaw throughout
this dispute has been whether, and to what extent, the software
delivered under the 1982 implementation contract was proprietary to
inslaw, any analysis of the allegations of wrongdoing must begin
with an understanding of the history of the PROMIS software, and of
the circumstances surrounding the delivery of a claimed proprietary
version to DOJ during the 1982 implementation contract.

Our discussion here of the factual background of the 1982
contract does not purport to be exhaustive. Instead, we have
attempted to focus on those facts that are relevant to the
conclusions we have reached. Where it is necessary to explain
specific findings or conclusions, we have undertaken a more
detailed examination of certain events in subsequent sections of
this report.

A. History of Inslaw

In 1973 William Hamilton and Dean Merrill formed the Institute
For Law And Social Research ("the institute") as a not-for-profit
entity. Among the activities of the Institute was the development

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of database management computer software to be used in automating
law enforcement offices. The software tool the Institute developed
for prosecutors* offices was called PROMIS, an acronym for
Prosecutor's Management Information System. PROMIS is a computer
based software tool designed to run on mainframe and mini-
computers. 4 Between 1973 and 1979 PROMIS was used primarily by
state and local prosecutors, and the Superior Court division of the
United States Attorney's office for the District of Columbia. This
original version of PROMIS is sometimes referred to as "Old
PROMIS. "

The institute developed Old PROMIS with funding provided
through contracts and grants from the Law Enforcement Assistance
Administration ( "LEAA" ) . Because of certain data rights clauses
contained in the Institute's LEAA grants and contracts, inslaw and
DOJ agree that Old PROMIS is in the public domain, and that neither
the institute nor its successor, inslaw, maintains any exclusive
rights to that product.

In 1979 the Institute entered into two contracts with the
government that are relevant to this dispute. The first, with the
LEAA, was a three year "cost-plus" contract that called for the
Institute to create certain upgrades and enhancements to Old
PROMIS. When the LEAA was eliminated in 1981, the final year of
this contract was transferred to DOJ's Bureau of Justice Statistics
( "BJS " ) . Under the LEAA contract that was transferred to BJS, the

4 A mini-computer is a scaled-down version of a mainframe
computer, and should not be confused with the much smaller personal
computers that became abundant in the 1980's.

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Institute continued to develop five specific enhancements to Old
PROMIS. 5 These enhancements have been referred to throughout the
Inslaw litigation as the five BJS enhancements.

The second 1979 contract was between the Institute and the
EOUSA. This contract, usually referred to as the "Pilot Project,"
was designed to determine the feasibility of using PROMIS as a
locally based case management program in United States Attorneys '
offices throughout the United States. The Pilot project called for
the institute to: (1) modify and install a modified version of Old
PROMIS 6 in two large United States Attorneys offices (the Southern
District of California, and the District of New Jersey) , and (2) to
develop and install a PROMIS- like software program on word
processing equipment in two smaller offices (the Districts of West
Virginia and Vermont) .

As with Old PROMIS, Inslaw does not dispute that the Pilot
project version of PROMIS and the five BJS enhancements were
created with public funding and are therefore in the public
domain. 7

s As a matter of DOJ internal accounting, approximately
$500,000 used to fund the contract after it was transferred to BJS
came out of the budget of the Executive Office of United States
Attorneys ("EOUSA") . This internal cost accounting does not affect
the claim of EOUSA to any of the versions of PROMIS, old or
enhanced .

6 The most significant change made in the Pilot Project version
of PROMIS was the addition of debt collection and other tracking
capabilities designed to improve case management in the civil
divisions of the United States Attorneys' offices.

7 prior to the 1982 contract award, inslaw had tried to claim
that it owned all versions of PROMIS, and that the government only

(continued. . . )

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In response to the announced liquidation of the LEAA, william
Hamilton decided to form a private enterprise to support existing
PROMIS users and to market new enhanced versions of PROMIS. Before
engaging in this enterprise, Hamilton notified DOJ of his
intentions, and DOJ expressed no objections to Hamilton's plans.
In January 1981 Hamilton organized Inslaw as a for-profit
corporation, and caused inslaw to purchase the assets of the
Institute. While Inslaw continued to receive certain funding from
the federal government during the period of 1981-1982, it also
began attracting private sources of both income and equity funding.
During this same period, Inslaw continued working on various
changes and improvements to the PROMIS software.

B . Negotiation of the 19B2 Implementation Contract

After reviewing the results of the Pilot Project, DOJ decided
to implement locally based case management systems in the United
States Attorneys offices throughout the country. Toward that end,
on November 2, 1981, DOJ issued a Request For Proposals (RFP) ,
which solicited technical proposals on a contract to: (1) implement
computer based PROMIS software in 20 "larger" United States
Attorneys' offices, and (2) create and install word processing
based case management software in the remaining offices. There
appears to be no dispute that (as to the computer based programs)
the RFP, and the resulting contract, required the installation only

7 ( . . .continued)

had a "non -exclusive plenary license for their use." Inslaw later
abandoned this position, and conceded during the bankruptcy
litigation that Old PROMIS, the Pilot Project version, and the five
BJS enhancements were in the public domain.

- 18 -

of a functional version of the Pilot Project PROMIS plus the five
BJS enhancements.

inslaw responded to the RFP in early December 1981. In its

initial response Inslaw notified DOJ that it intended to improve

the original PROMIS software and to create enhancements beyond

those contained in the version called for in the RFP.

Specifically, Inslaw stated:

During the life of this project -- but not as part
of this project -- inslaw plans new enhancements
and modifications to the basic PROMIS software and
to the original version of PROMIS for u.S.
Attorneys .

. . . . [Ilmprovements funded by other {i.e. non-

governmental] sources and developed and accepted
for inclusion in the software supported by Inslaw,
will be made available to the U.S. Attorneys'
offices .

Neither in that proposal, nor in later pre-contract submissions or
negotiations, did Inslaw clarify specifically what it meant by
"accepted for inclusion" or "will be made available."

During the pre- award negotiations DOJ and Inslaw
representatives specifically discussed the issue of the parties'
respective rights in the software to be delivered under the
contract. The original draft of the contract contained two data
rights clauses: Article XII and clause 74. Clause 74 of the

contract gave the government unlimited rights in any technical data
and computer software delivered under the contract. 8 Article xil.

8 A portion of that clause also contained a provision for
giving the government limited rights in any specifically identified
items. But no such items were identified in clause 74. Instead,
when the contract was signed DOJ's contracting officer inserted
"N/A, " for not applicable, in that portion of the clause.

-19 -

on the other hand, purported to take the additional step of
restricting Inslaw's right to market any products containing the
software delivered under the contract. 9 clause XII was removed
when inslaw expressed concerns that it would hinder inslaw's
ability to market its enhanced PROMIS products to other users.

While the negotiations with Inslaw were ongoing, DOJ hired C.
Madison "Brick" Brewer to be the Project Manager overseeing the
installation of PROMIS in United States Attorneys' offices.
Brewer, who a number of years earlier had been General Counsel to
the Institute, began working at EOUSA in late January 1982. He
attended only one or two negotiating sessions prior to the signing
of the contract. 10

The final contract was signed on March 12, 1982. The
contract, a cost-plus contract that also contained a fee provision,
called for Inslaw to implement computer based PROMIS in 20 large
United States Attorneys' offices, and to develop and implement
PROMIS -like word processing based case management software in 74
smaller offices. Under the contract, DOJ retained an option to
request the installation of PROMIS in 10 additional offices. The
version of PROMIS required under the contract -- and therefore the
only version to which DOJ could claim unlimited rights by virtue of

’Specifically, Article XII provided, "[t]he contractor shall
neither retain nor reproduce for private or commercial use any
materials furnished or produced under the contract."

10 we discuss the details of Brewer's hiring and performance
elsewhere in this report.

- 20 -

the contract -- was a functional version of the Pilot Project
PROMIS plus the five BJS enhancements.

C. Early Proprietary Rights Disputes

It was less than a month after the execution of the contract
that Inslaw and DOJ had their first disagreement over the
respective property rights of the parties. In early April 1982
Roderick Hills, one of Inslaw's outside lawyers, wrote to Associate
Deputy Attorney General Stanley Morris regarding Inslaw’s plans to
market PROMIS privately. Hills’ purpose in writing the letter was
to obtain a "sign-off" from DOJ, so that Inslaw and its associates
could have some assurance that DOJ would not attempt to hinder
Inslaw's efforts to market proprietary software. Attached to
Hills' letter was an April 1, 1982, memorandum that had been
written by William Hamilton. The Hamilton memorandum indicated
that Inslaw planned to market a product called PROMIS 82, over
which it was asserting proprietary rights. In the memorandum
Hamilton asserted that Inslaw's federal funding ended in May 1981,
and that therefore improvements made by Inslaw to PROMIS after that
date were proprietary to it.

On April 19, 1982, representatives of Inslaw and DOJ met and
discussed Inslaw's plans as reflected in the Hamilton memorandum.
DOJ’s project manager, Brewer, made clear at the meeting that he
took issue with the representations and conclusions set forth in
the Hamilton memorandum, which he referred to as "scurrilous."
Most of the people at that meeting agree that Brewer "got hot," and
was adamant in his opposition to the positions taken in the

- 21 -

memorandum. Indeed, in an internal Inslaw memorandum created
shortly after the meeting, the inslaw representatives who were
present at that meeting speculated that the force of Brewer's
statements reflected an "obvious dislike of Bill Hamilton and a
resentment for the success of Inslaw personified in him." Shortly
thereafter, Inslaw representatives complained to Associate Deputy
Attorney General Morris that Brewer was biased, and ascribed this
bias to the fact that Brewer had been "asked to leave” his previous
position as General Counsel at the Institute. As a result of this
complaint, Morris instructed EOUSA deputy director Lawrence
McWhorter that Brewer should no longer "take the point outside the
Department" regarding DOJ's dealings with Inslaw on the data rights
issue.

At least some of the positions taken by Brewer at the April 19
meeting, as opposed to the manner in which they were presented,
appear to us to have been well founded. For example. Brewer argued
that to the extent the memorandum claimed that all software
developed after May 1981 was proprietary to Inslaw the memorandum
was incorrect, in that the five BJS enhancements were in the public
domain, even though they still had not been delivered by Inslaw as
of April 1982. That was true, and Inslaw does not now dispute it.
Similarly, the memorandum was incorrect to the extent that it
suggested that Inslaw had received no federal funding after May

- 22 -

1981. The $500,000 under the BJS contract was but one example of
federal monies received by Inslaw during that period. 11

Ultimately, Inslaw and DOJ were able to come to a resolution
that satisfied Inslaw's need for a sign-off and DOJ's need for
assurance that Inslaw's marketing efforts would not diminish its
rights under various contracts. In a series of letters and phone
calls during late spring of 1982, Inslaw's lawyers assured DOJ
personnel that Inslaw' s marketing of PROMIS 82 would have no effect
on the performance of the EOUSA contract or on the software to
which the government was entitled. As to whether PROMIS 82 was in
fact proprietary to Inslaw, Hills assured Morris in a letter of May
24, 1982, that PROMIS 82 contained "enhancements undertaken by
Inslaw at private expense after the cessation of LEAA funding."
Based on this representation, Morris responded to Inslaw in an
August 11, 1982, letter, stating "[t]o the extent that any other
enhancements to [PROMIS 82] were privately funded by Inslaw and not
specified to be delivered to the Department of Justice under any
contract or other arrangement. Inslaw may assert whatever
proprietary rights it may have." This letter provided Inslaw the
assurances it desired, and the data rights issue did not arise
again until DOJ requested a copy of the software.

u We found documentation indicating that after May 1981 inslaw
executed two modifications to the BJS contract alone, in July and
October 1981, which resulted in $650,000 being allocated to the
development of PROMIS modifications. In addition, we have been led
to believe that during 1981 Inslaw was receiving funds from
contracts with DOJ's Lands Division and with the District of
Columbia United States Attorney's Office.

- 23 -

D. The Advance Payments Dispute

Under the 1982 EOUSA contract Inslaw was entitled to receive
what have been referred to as "advance payments." This name is
somewhat misleading. The so-called advance payments clause of the
contract only permitted inslaw to draw against a special bank
account after receiving approval from the government's contracting
officer. In practice, the government contracting officer's
approval was forthcoming only after work had been completed and
invoiced by Inslaw. This mechanism allowed Inslaw to receive
payment in advance of the waiting period usually necessary to
process an invoice, but not in advance of the contpletion of the
work.

Advance payment clauses are unusual in government contracts. 12
They are approved only when there is evidence that the financial
condition of the contractor is such that it will not be able to
bear the burden of self-financing its receivables from the
government. In order to qualify for the advance payments clause in
the EOUSA contract Inslaw had to make a number of representations
about its financial resources, including a representation that it
was not reasonably capable of obtaining financing from banks or
other traditional commercial sources.

The EOUSA contract also contained a contract provision that
prohibited Inslaw from pledging or assigning its rights under the
contract. On November 1, 1982, Inslaw informed DOJ that it had

12 In fact, it appears that Inslaw was the only DOJ contractor
that had such a clause at that time.

- 24 -

violated this provision by assigning its government invoices as
collateral for a line of credit at the Bank of Bethesda. Upon
receiving this notice, DOJ asked Inslaw to provide farther
information concerning Inslaw's line of credit at the Bank of
Bethesda. The documentation supplied by Inslaw showed that the
line of credit had been established at the bank in April of 1982,
less than one month after the contract was executed.

On January 26, 1983, the contracting officer, Peter Videnieks,
wrote Inslaw a letter confirming that DOJ considered the Bank of
Bethesda line of credit to be a violation of the contract.
Videnieks ' letter stated that DOJ intended to terminate the advance
payments provision of the contract pursuant to the default
provisions of the agreement. While conceding for the most part
that the line of credit was a "technical violation" of the
contract, inslaw adamantly opposed termination of the advance
payments, inslaw insisted that the government was not at financial
risk as a result of the violation and emphasized that the loss of
the advance payments could greatly disrupt Inslaw's business, a
consequence that could only have negative ramifications for the
EOUSA contract. This dispute over advance payments was not
resolved until April of 1983, when inslaw and DOJ executed
Modification 12 to the EOUSA contract.

E. The Events Leading Up To Modification 12

During November 1982, at around the same time that DOJ first
learned of Inslaw’s borrowing from the Bank of Bethesda, Videnieks
received additional information concerning Inslaw's financial

- 25 -

situation. Robert whitely, DOJ's auditor on the inslaw contract,
told Videnieks that based on his review of Inslaw's financial
statements and on his discussions with Inslaw's accountants, he
felt that inslaw was insolvent. Also, videnieks himself was told
by inslaw’s comptroller that Inslaw had missed at least one
payroll. in addition, videnieks and other DOJ personnel had
concluded that inslaw 's cash flow was very tight, based on their
having observed inslaw personnel "hand-walk" advance payments
checks through DOJ for signature, instead of simply relying on the
mails.

As he received information about Inslaw's financial condition,
videnieks was aware that an inslaw failure at that time would leave
DOJ without any copies of the version of PROMIS called for in the
contract. The problem was that as of November 1982 DOJ had not yet
received any copies of the software Inslaw was to deliver under the
contract. Because DOJ had not yet obtained the computer hardware
on which PROMIS was to be installed in the various offices. Inslaw
was providing PROMIS to the designated United States Attorneys
offices on a time sharing arrangement from a VAX computer in
Virginia. These united States Attorneys offices could access
Inslaw's time sharing computer on remote terminals through
telecommunications facilities, and thus use PROMIS in that way
until DOJ's computers were installed on-site.

It was against this background, that on November 19, 1982, DOJ
sent Inslaw a formal request for a copy of the software being used
to perform the contract. The request stated:

- 26 -

Pursuant to Article XXX [ “3 of the subject
contract the Government requests that you
provide immediately all computer programs and
supporting documentation developed for or
relating to this contract.

Inslaw responded to this letter on November 30. Inslaw noted that
the request was technically deficient {in that the contract
required that such a request be made by the contracting officer) ,
but also stated that it would "proceed to produce the programs and
documents requested" if a proper request was made. On December 6,
1982, Videnieks sent a formal request under Article XXX, requesting
the production of all the PROMIS programs and documentation being
provided under the contract.

The next significant discussion between DOJ and Inslaw
concerning the request for software was on February 4, 1983. 14 The
primary focus of the meeting was the advance payments dispute.
Toward the end of that meeting, the subject of the government's

“Article XXX permitted the government to request these
materials at any time during the life of the contract.

14 Inslaw had sent a letter to DOJ on February 2, notifying DOJ
that it was claiming that the time -sharing version of PROMIS
contained proprietary enhancements. The letter read, in part:

In producing these tapes, inslaw and the Department
of Justice will have to reach an agreement on the
inclusion or exclusion of certain proprietary
features which Inslaw has been making available to
U.S. Attorneys offices that utilize its time
sharing service. These features are normally
included only on tapes produced pursuant to license
agreements .

This letter did not reach DOJ prior to the February 4 meeting.

- 27 -

William

request for a copy of the contract software was raised. 15
Hamilton and others from Inslaw told the DOJ personnel in
attendance that the VAX ( i .e. , the time sharing) version of PROMIS
that was being used under the contract by the United States
Attorneys' offices contained certain proprietary enhancements to
which the EOUSA was not entitled. Hamilton said that Inslaw
therefore could not provide those enhancements to DOJ unless DOJ
agreed to limit dissemination of the software.

This was the first time that Inslaw had notified DOJ that any
proprietary enhancements were in the time- sharing version of PROMIS
being used by the u.s. Attorneys' offices. 16 The DOJ personnel
stressed that they were entitled under the contract to a version of
PROMIS in which the government had unlimited rights, and asked
Inslaw to provide additional information about the enhancements it
was claiming as proprietary. Inslaw agreed to provide the
information. In addition, Hamilton made statements indicating that
it would be very difficult to remove the enhancements from the time
sharing version of PROMIS, but said that Inslaw would be willing to

15 lt appears that from at least this point on, doj collapsed
the negotiations of the advance payment dispute into the
negotiations of the software request and the proprietary rights
issue.

16 Videnieks confirmed this fact in a March 8, 1983, letter to
inslaw's government contracts lawyer, Harvey Sherzer, in which he
specifically asked sherzer to identify any DOJ personnel to whom
notice was given prior to February 4, 1983, that there were
proprietary enhancements contained in the VAX version of PROMIS.
Inslaw never responded to the letter, or in any other way
identified any government representative it claimed had notice that
Inslaw was providing DOJ access to a version of PROMIS other than
the version called for in the contract.

- 28 -

provide the proprietary enhancements to DOJ without additional
charge if DOJ would limit their dissemination. 17 DOJ took the
position that it was not seeking to obtain any enhancements for
free, but stressed that it was entitled under the contract to a
version in which it had unlimited rights. In his March 8, 1983,
letter to Sherzer, Videnieks reaffirmed DOj's view that the
contract called for Inslaw to produce software in which the
government had unlimited rights, and that delivery of a version
containing restrictions would not satisfy Inslaw's obligations
under the contract.

On March 9, 1983, Sherzer wrote to Videnieks concerning the
proprietary rights -issues . Sherzer did not dispute that DOJ was
entitled under the contract to software in which it had unlimited
rights. Instead, the letter explained that in performing the
contract through a time sharing computer inslaw had been using a
version of PROMis that contained proprietary enhancements to which
DOJ was not entitled. Sherzer said that inslaw was prepared to
provide a copy of the contract version of PROMIS, but suggested
that it would be in the government's interest to obtain the "latest
version" of PROMIS, which was then being provided under time

17 From what we have been able to determine at this point, the
expense involved in producing an "unenhanced" version of PROMIS
resulted from the fact that Inslaw did not maintain a version of
PROMIS that contained only the U.S. Attorneys' offices
enhancements, i .e. , the Pilot Project version plus the five BJS
enhancements. Instead, Inslaw maintained only one VAX version of
PROMIS, which contained both public domain and claimed proprietary
software. Thus, to produce a "stripped down" version of PROMIS in
which DOJ had unlimited rights would have required Inslaw to
manually back each enhancement out of each module of the program.

- 29 -

sharing. Sherzer again said that inslaw would supply those
enhancements at no additional cost if the government would agree
"not to disseminate this enhanced and proprietary version of inslaw
software beyond those offices already covered by the present
contract, i.e., the Executive Office and the 94 U.S. Attorney's
Offices . "

While DOJ was considering Inslaw's limited dissemination
proposal, Sherzer sent a letter proposing an escrow arrangement to
resolve the proprietary rights dispute. Under this proposal.
Inslaw would provide a copy of the software to an escrow, who would
then be instructed to deliver the software to DOJ in the event of
Inslaw's financial demise.

Inslaw's escrow proposal caused internal debate at DOJ.
Brewer and videnieks were opposed to the idea. videnieks, in
particular, was opposed to any escrows, agreements, or
modifications. His view was that Inslaw was required to provide
DOJ with functional software in which the government had unlimited
rights, and that it should be left to Inslaw to decide how it
wanted to satisfy that obligation. ultimately, a middle ground
prevailed within DOJ. Instead of an escrow arrangement, DOJ would
propose a contract modification whereby the parties would mutually
agree on a method for resolving the proprietary rights dispute.

On March 18, 1983, videnieks wrote a letter to Sherzer

proposing a contract modification in place of the escrow solution.

videnieks outlined his alternative solution as follows:

In lieu of the proposed escrow agreement which
the department currently has under review, the

- 30 -

Government offers to agree that it will not
disseminate or disclose the PROMIS software
requested in the Contracting Officer's letter
of December 6, 1982 beyond the Executive
Office for United States Attorney and the 94
United States Attorneys' Offices covered by
the subject contract, until the data rights of
the parties to the contract are resolved. We
will do this in exchange for receipt of copies
of all materials requested in the Contracting
Officer's December 6 letter. The Government's
agreement not to disseminate or disclose the
PROMIS software pending resolution of the
issues does not change the government's rights
under the contract.

Videnieks' letter went on to describe the proposed format for
resolving the data rights dispute. Under Videnieks' proposal,
inslaw was to identify its claimed proprietary enhancements and to
demonstrate that those enhancements were developed at private
expense and outside the scope of any government contract. DOJ
would then:

review the effect of any enhancements which
are determined to be proprietary, and then
either direct inslaw to delete those
enhancements from the versions of PROMIS to be
delivered under the contract or negotiate with
Inslaw regarding the inclusion of those
enhancements in that software. The Government
would then either destroy or return the
"enhanced" versions of PROMIS in exchange for
the Government software including only those
enhancements that should be included in the
sof tware.

in the letter videnieks acknowledged the importance of the data
rights issue, and noted that it needed to be resolved "as soon as
possible, but no later than the first PROMIS installation on
Government Furnished Equipment."

Sherzer and Inslaw found DOJ's alternative proposal
acceptable, and On March 23 Sherzer sent Videnieks a draft contract

- 31 -

modification consistent with Videnieks' March 18 letter. On
April 11, 1983, Inslaw and DOJ executed Modification 12 to the

contract. The text of Modification 12 stated that:

The purpose of this Supplemental
Agreement is to effect delivery to the
Government of VAX -specific PROMIS computer
programs and documentation requested by the
Government on December 6, 1982, pursuant to

Article XXX- -Data Requirements, and to at this
time resolve issues concerning advance
payments to the Contractor.

The modification went on to list the software to be delivered by
Inslaw. As to DOJ's obligation, the modification said:

The Government shall limit and restrict
the dissemination of the said PROMIS computer
software to the Executive Office for United
States Attorneys, and to the 94 United States
Attorneys' Offices covered by the contract,
and, under no circumstances shall the
Government permit dissemination of such
software beyond these designated offices
pending resolution of the issues extant
between the contractor and the Government
under the terms and conditions of contract No.

JVUSA- 82 -C-0074;

Pursuant to its obligation under Modification 12, Inslaw produced
a copy of the VAX version of PROMIS on April 20, 1983.

F. inslaw's Efforts to Identify the Proprietary Enhancements
Prior to the execution of Modification 12 Inslaw had not
specifically identified the proprietary enhancements that it
claimed were contained within the VAX version of PROMIS. Pursuant
to the resolution procedure outlined in videnieks 1 March 18 letter,
and formalized in Modification 12, Inslaw made its first effort to
identify the proprietary enhancements in an April 5, 1983, letter
to videnieks. on April 12 Inslaw supplemented its April 5 letter

- 32 -

in response to videnieks' request for a clarification. These
submissions described various changes Inslaw had made to PROMIS,
and set forth Inslaw's "estimate" of what percentage of those
changes were privately funded. Inslaw's submission did not include
any primary materials, such as time sheets or change records.

videnieks notified inslaw by letter on April 21 that its April
5 and 12 submissions were inadequate. 18 videnieks told Inslaw that
as to each enhancement it "must provide all information necessary
to demonstrate that the change was developed both at private
expense and outside the scope of inslaw's performance of any
government contract . "

Inslaw submitted a methodology that it thought addressed
videnieks' concerns in a May 4, 1983, letter from Sherzer to
videnieks. in that letter Sherzer noted that Inslaw's proposed
methodology would require considerable effort on its part to
retrieve various historical financial and technical documents.
Sherzer therefore sought assurances from DOJ prior to undertaking
such an effort that DOJ would accept the proposed methodology.
Sherzer specifically asked DOJ in his letter to either accept the
proposed methodology or to suggest whatever changes DOJ felt was
necessary.

videnieks' response to sherzer' s letter did not come for over
a month. During that period videnieks asked Rugh to evaluate the

18 A1 though videnieks was nominally the person dealing with
Inslaw on this issue, he was relying almost completely on Jack
Rugh, Brewer's deputy, and the contracting officer's Technical
Representative, Mike Snyder, to evaluate Inslaw's technical
proposals .

- 33 -

methodology. Rugh told Videnieks it was unacceptable. Videnieks
and Rugh then considered a number of potential responses, one of
which was to propose an acceptable methodology. In the end,
Videnieks and Rugh decided simply to reject inslaw' s proposed
methodology and say nothing more. in a June 10, 1983, letter to
Sherzer, Videnieks notified Inslaw that the proposed methodology
was unacceptable. As to Sherzer' s request that DOJ either approve
the methodology or suggest revisions, the letter stated simply that
"tt]he Government is in a position to do neither." The letter said
it was Inslaw's burden to prove the existence of proprietary
enhancements, and that if inslaw did not do so by July 11, 1983,
DOJ would be "forced to conclude that all 251 changes/enhancements
. . . are to be delivered to the government for its unrestricted
use."

Sherzer wrote an additional letter on July 21, 1983, stating
that Inslaw was preparing to submit further documentation and
information regarding the enhancements in early September. That
approach was also rebuffed by Videnieks, and Inslaw submitted no
other documentation regarding its claimed proprietary enhancements
to DOJ during the life of the contract.

In August of 1983 Inslaw began the first installation of
PROMIS on one of the government furnished Prime computers . In
order to be able to run PROMIS on the Prime computers Inslaw ported
the VAX version of PROMIS, which contained the alleged
enhancements . Inslaw could have ported the prime version of PROMIS
from the Pilot project version of PROMIS (that contained no

- 34 -

allegedly proprietary enhancements) , but, according to trial
testimony, chose to complete the port from the VAX version because
it was easier and less expensive for ins] aw. inslaw continued to
install this same version in the other 19 designated U.S.
Attorneys’ offices. As far as we can tell, there were no specific
discussions between inslaw and DOJ about what version of PROMIS
should be installed on the Prime computers.

inslaw filed for protection under Chapter 11 of the bankruptcy
laws in February 1985. The PROMIS implementation contract expired
in March 1985. After the contract with inslaw expired, DOJ self-
ins tailed the Prime version of PROMIS that had been supplied by
inslaw in at least 23 additional United States Attorneys' offices,
inslaw claims that it first learned of these self -installations in
September 1985. Inslaw then wrote to DOJ, complaining that any use
of the allegedly enhanced PROMIS beyond the 20 sites at which
inslaw installed PROMIS was a violation of Modification 12.
Shortly thereafter Inslaw presented to DOJ a claim for $2.9 million
dollars, which Inslaw characterized as the license fees owing from
DOJ’s unlawful use of the software. DOJ denied this claim. Inslaw
did not appeal this denial of the license fees to the Contract
Appeals Board. instead, it filed an adversary proceeding in its
bankruptcy case, claiming that DOJ's unauthorized use of the
software, as well as certain other conduct by DOJ, violated the
automatic stay provisions of the Bankruptcy Code. in July 1987
Bankruptcy Judge Bason held a two week trial on the liability phase
of Inslaw's claims. Judge Bason ruled in favor of Inslaw, finding

- 35 -

that DOJ fraudulently converted inslaw's software, and ultimately

ordered DOJ to pay damages of approximately $6,8 million.

G. The Effect of The Bankruptcy Court's Findings

in investigating the various allegations made by Inslaw, we

have given consideration to the findings and conclusions of

Bankruptcy Judge Bason in the adversary proceeding. In re INSLAW ,

83 B.R. 89 (Bankr. Ct. D.D.C. 1988). The judgment entered on those

findings was affirmed by the district court, 113 B.R. 802, 19 but

ultimately reversed on jurisdictional grounds by the Court of

Appeals for the D.c. Circuit, united States v. INSLAW , 932 F.2d

1467 (D.C. Cir. 1991), cert , denied , 112 S. Ct. 913 (1992). The

Court of Appeals held that the automatic stay of the Bankruptcy

Code did not reach the use of property in a party's possession

under a claim of right at the time the bankruptcy was filed.

Accordingly, the appellate court held:

As the bankruptcy court had no jurisdiction to
hear the claims asserted under [the Bankruptcy
Code] , we reverse the district court and
remand the case with directions to vacate all
orders concerning the Department's alleged
violations of the automatic stay and to
dismiss INSLAW's complaint against the
Department .

The question of the weight to be given Bankruptcy Judge
Bason's findings has been a subject of some controversy. The two

“Contrary to the impression created by the Investigative
Report of the House Committee on the Judiciary, the District Court
did not review the evidence de novo and adopt as its own the
findings made by the Bankruptcy Court, instead, the district court
reviewed the Bankruptcy Court's findings of fact under the familiar
"clearly erroneous" standard. 113 B.R. at 814 (citing Bankruptcy
Rule 8013) .

* 36 -

Congressional committees that have investigated Inslaw's
allegations have accorded Bankruptcy Judge Bason's findings
different weight.

While Bankruptcy Judge Bason's findings were still subject to
appeal, the Permanent Subcommittee on investigations of the Senate
Committee on Governmental Affairs issued a Staff Study
investigating the Department's treatment of Inslaw. In general,
the Subcommittee did not attempt to reexamine Bankruptcy Judge
Bason’s rulings and "treated the Court's findings and conclusions
as valid judicial decisions unless and until overturned within the
judicial system." The Staff Study makes clear, however, that the
Subcommittee felt free to reexamine the Bankruptcy Court's findings
when it believed necessary.

Although issued more than a year after the D.c. Circuit Court
of Appeals' reversal of Bankruptcy Judge Bason's judgment, the
House Committee on the Judiciary took a different approach. The
House Committee Report seems to accept as conclusively true all of
the findings and conclusions of Bankruptcy Judge Bason. Indeed,
the Committee Report criticizes DOJ for taking the "spurious
position" in litigation pending between DOJ and Inslaw before the
Department of Transportation Board of Contract Appeals ( "DOTBCA" ) 20
that it was not bound by those findings. On August 27, 1992,
however, DOTBCA had issued an opinion that agreed with DOJ's
position that Bankruptcy Judge Bason's findings were a "nullity."

20 The contract disputes between the parties were presented to
DOTBCA pursuant to the provisions of the Contract Disputes Act
because DOJ has not established its own board.

- 37 -

As DOTBCA noted, the Court of Appeals' reversal rendered the
Bankruptcy Court's findings without any binding effect. A vacated
judgment has no preclusive effect either as a matter of collateral
or direct estoppel or as a matter of the law of the case. Indeed,
in any subsequent litigation between Inslaw and DOJ in all
likelihood Bankruptcy Judge Bason's findings would not even be
admissible in evidence, much less binding upon DOJ.

This is not to denigrate the seriousness of the charges made
by Inslaw or the effort made by Bankruptcy Judge Bason in preparing
his findings. We have considered the Bankruptcy Court's findings,
but we have not regarded our inquiry as confined by those findings
and conclusions. Instead we have considered those findings in the
light of the evidence, produced at trial or otherwise, and made our
own assessment of the weight of the evidence, including the
credibility of the witnesses we interviewed.

as is apparent elsewhere in this report, we disagree with
Bankruptcy Judge Bason's assessment of the evidence in several
important respects. Unlike Bankruptcy Judge Bason, we are
unwilling to make blanket adverse assessments about the credibility
of virtually every witness associated with DOJ. Nor do we
universally credit all Inslaw's witnesses as unfailingly accurate,
truthful, and unbiased. Consequently, particularly with respect to
our assessments of the motivation, purpose, and basis for the DOJ's
handling of the contract with Inslaw, we have reached conclusions
that are in many instances different from those reached by
Bankruptcy Judge Bason.

- 38 -

V.

THE ALLEGATION OF A CONSPIRACY TO STEAL PROMIS

Perhaps the most serious allegation made by Inslaw is that
high-level DOJ employees, including Attorney General Meese,
conspired with Earl Brian to steal Inslaw's software and to destroy
Inslaw. ? The purpose of this alleged conspiracy was to bring
financial benefit to a company called Hadron, Inc., in which Brian
had both a direct and indirect financial interest. 21 As originally
set out in an affidavit authored by William Hamilton, the Hadron
conspiracy theory postulated that DOJ wanted to force inslaw into
liquidation so that Hadron could buy Inslaw's assets, after which
DOJ would award Hadron a "massive sweetheart contract." The theory
has evolved over time. Inslaw has since presented testimony from
witnesses who claim that DOJ employees actually delivered copies of
Inslaw's proprietary software to Brian and Hadron before Inslaw's
bankruptcy. According to these witnesses, Brian was involved in
various covert intelligence operations, and DOJ officials gave
Brian and Hadron copies of PROMIS to reward Brian for the covert
role he played in the so-called "October Surprise" conspiracy. 22

21 Earl W. Brian is a physician by training. He served as a
combat surgeon in Vietnam, and later was a member of the faculty of
the University of Southern California. He left medical practice,
and served as California's Secretary of Health and Welfare under
then Governor Reagan in the early 1970s. (Edwin Meese was also a
member of Reagan's staff at that time). After leaving government,
Brian began working in the areas of business and investment. He
founded an investment company called Biotech Capital Corporation,
now known as Infotechnology, Inc. Both Brian and Biotech owned
stock in Hadron in the early 1980s.

22 We note that both the House Task Force to Investigate Certain
Allegations Concerning the Holding of American Hostages By Iran in
19 80 (the "October Surprise Task Force") and Special Counsel to the

(continued. . . )

- 39 -

We are not the first to investigate the allegations that upper
level DOJ employees conspired to destroy inslaw and to reward Earl
Brian and Hadron. In September 1989 the Staff of the Senate's
Permanent Subcommittee On Investigations of the Committee on
Governmental Affairs completed its more than year-long
investigation into DOJ's handling of its contract with Inslaw.
After reviewing thousands of documents and interviewing numerous
witnesses, the Staff of the Senate Subcommittee concluded that it
could find "no proof of any connection between Brian or Hadron and
the Department with regard to the INSLAW contract." 23 Because of
the seriousness of the allegations, we nonetheless undertook an
independent review of evidence surrounding the alleged conspiracy
to benefit Earl Brian. We not only reviewed materials obtained by

22 ( . . . continued)

Senate Foreign Relations Committee, Subcommittee on Near Eastern
and South Asian Affairs ("Senate Special counsel") recently
released reports finding no credible evidence to support the
allegations that members of the 1980 Ronald Reagan campaign staff
negotiated to delay the release of the American hostages in Iran.

23 The Committee On The Judiciary of the House of
Representatives also investigated Inslaw's allegations regarding
Hadron and Brian. In its report, the House Committee made no
specific findings about these allegations, other than to note that
they had been made. The House Committee Report called the
allegations about Brian's role "intriguing ... but without the
requisite degree of causation and factual convergence necessary to
draw conclusions at this time into potential wrongdoing in the
Inslaw matter." Although we admit some difficulty in interpreting
this phrase, we understand it to mean that the House Committee's
investigators, like the Staff of the senate subcommittee, found
insufficient evidence on which to base any finding of wrongdoing by
Brian.

- 40 -

the Senate Staff, 24 but independently interviewed witnesses and
searched files as part of our own investigation of these
allegations, we found that the evidence offered by inslaw falls
into two categories: "Direct proof" in the form of statements from
witnesses claiming to have personal knowledge of Earl Brian's role
in the conspiracy to steal PROMIS, and "indirect proof" in the form
of statements from witnesses who, although they generally do not
purport to have any knowledge of an attempt by Brian or Hadron to
obtain inslaw's assets, nonetheless provide evidence that William
Hamilton believes supports his hypothesis that DOJ was attempting
to award a "sweetheart deal" to Hadron, we address these two types
of evidence in turn.

A. The Claimed Direct Evide

we have interviewed ye4n<»vimials whom inslaw officials

and others have identified as having personal knowledge of the

activities of Earl Brian in connection with the distribution of

PROMIS software: ^ pursuant to

Material 0mitt p ele)

Fed* ft* * none of these

individuals provided credible evidence that Earl Brian, Hadron, or

any other Brian affiliate, was involved in theft, conversion, or

distribution of Inslaw's proprietary software.

24 The House Committee to date has not provided us any of the
evidentiary material it obtained during its three year
investigation.

- 41 -

1 . Michael Riconosciuto

Michael Riconosciuto can fairly be described as the key
witness against Brian. Riconosciuto has claimed, among other
things, that he personally met with Brian, that he received a copy
of PROMIS from Brian, that he personally performed alterations to
PROMIS software so that Brian and others could sell PROMIS
internationally, and that he is personally aware of various
entities to which altered PROMIS was distributed. Given the
breadth and specificity of Riconosciuto ' s allegations, we devoted
considerable effort to trying to determine whether there existed
any evidence to corroborate these claims. We interviewed not only
individuals whom Riconosciuto identified as having knowledge of his
activities, but also people who would have known about these events
had they taken place as described. We begin with a summary of the
specific allegations made by Riconosciuto.

a. Summary of Riconosciuto »s Allegations
During our investigation we reviewed various statements
attributed to Riconosciuto. We identified four occasions on which
Riconosciuto had made statements concerning Inslaw and PROMIS,
where we could determine with a high degree of accuracy exactly
what Riconosciuto had said on that occasion. Three of those
statements were under oath and transcribed. The remaining
statement was recorded in notes made by the person to whom the
statement was made: William Hamilton. 25

2s We are aware of a number of press reports attributing various
statements to Mr. Riconosciuto. We have not placed primary

(continued. . . )

• 42 -

(i) Riconosciuto 1 s Calls To The Hamiltons

As best we can determine, Riconosciuto’ s first statements
about PROMIS were made in the Spring of 1990. On May 18, 1990, a
reporter for one of Lyndon LaRouche's publications called William
and Nancy Hamilton. The reporter told the Hamiltons that a month
earlier Riconosciuto had told him (the reporter) that "the INSLAW
mess at the Justice Department is related to a decision by Ronald
Reagan to provide a financial reward to Earl Brian for an
intelligence contribution to the 1980 election." The reporter then
completed a conference call and introduced the Hamiltons directly
to Riconosciuto. 26

According to the Hamiltons' records of that call, Riconosciuto
said that he and Earl Brian were both hired as consultants to a
company called Wackenhut Research, Inc.j which Riconosciuto
described as a subsidiary of Wackenhut Security Corporation.
Riconosciuto said that he and Brian travelled together to Iran in
1980 and paid a $40 million bribe to certain Iranians in order to
prevent the release of American hostages prior to the November 1980
election. He said that he personally handled the electronic funds
transferring work in cqnnection with these bribe payments.
Riconosciuto also claimed that Brian mentioned inslaw or PROMIS "as
though Brian were a principal" in the company. Riconosciuto said

25 { . . . continued)

reliance on these reports because we have no way of judging the
accuracy of the attributions.

26 lnslaw provided us with copies of two memoranda to file
(dated May 18 and June 28, 1990), in which William and Nancy
Hamilton summarize their telephone call with Riconosciuto.

- 43 -

that PROMIS was the payoff to Brian for his contribution to the
Iran effort, and said that he (Riconosciuto) still had a copy of
the PROMIS source code. Riconosciuto said a computer company he
owned (which he referred to as TCS Software of Houston, Texas) had
integrated PROMIS into a report generation software product that
was marketed by TCS to government agencies. Riconosciuto said that
he could provide the Hamiltons with various pieces of evidence to
support these allegations, including: (1) photographs of him and
Earl Brian together in Iran in 1980, (2) copies of his and Brian's
1099 forms from Wackenhut Security, (3) his passport reflecting a
1980 trip to Iran, and (4) a copy of the VAX version of PROMIS.

(ii) Riconosciuto's March 21# 1991 Affidavit

On March 21, 1991, Riconosciuto executed an affidavit for
submission in connection with Inslaw's adversary proceeding in the
Bankruptcy Court. In that affidavit Riconosciuto claimed that he
had been Director of Research for a joint venture between wackenhut
Corporation and the Cabazon Indians of Indio, California. He
described the Wackenhut - Cabazon joint venture as one engaged in the
development and manufacture of certain military type materials,
which were then intended to be sold to foreign governments and
forces.

According to Riconosciuto 's affidavit, Peter videnieks was a
frequent visitor to the Cabazon Indian reservation, and a "close
associate" of Earl Brian. He then went on to describe the role he,
videnieks, and Brian played in converting and distributing stolen
Inslaw software:

- 44 -

In connection with my work for Wackenhut,

I engaged in some software development and
modification work in 1983 and 1984 on the
proprietary PROMIS computer software product.

The copy of PROMIS on which I worked came from
the U.S. Department of Justice. Earl w. Brian
made it available to me through Wackenhut
after acquiring it from Peter Videnieks, who
was then a Department of Justice contracting
official with responsibility for the PROMIS
software. I performed the modifications to
PROMIS in Indio, California; Silver Spring,

Maryland; and Miami, Florida.

The purpose of the PROMIS software
modifications that I made in 1983 and 1984 was
to support a plan for the implementation of
PROMIS in law enforcement and intelligence
agencies worldwide. Earl w. Brian was
spearheading the plan for this worldwide use
of the PROMIS computer software.

Some of the modifications that I made
were specifically designed to facilitate the
implementation of PROMIS within two agencies
of the Government of Canada: the Royal
Canadian Mounted Police (RCMP) and the
Canadian Security and Intelligence Service
(CSIS) . Earl w. Brian would check with me
from time to time to make certain that the
work would be completed in time to satisfy the
schedule for the RCMP and CSIS implementations
of PROMIS.

The proprietary version of PROMIS, as
modified by me, was, in fact, implemented in
both the RCMP and the CSIS in Canada. It was
my understanding that Earl w. Brian had sold
this version of PROMIS to the Government of
Canada.

Riconosciuto ended his affidavit by claiming that he had been
threatened by Videnieks. Riconosciuto said that he had a telephone
conversation with Videnieks in February of 1991, during which
Videnieks told him not to cooperate with the House Judiciary
Committee's investigation. According to Riconosciuto' s affidavit,
Videnieks said that if Riconosciuto cooperated with the Judiciary

* 45 -

Committee's investigation he would be "punished." The punishments
allegedly outlined by Videnieks included the indictment of
Riconosciuto for savings and loan fraud and for perjury.

(iii) Riconosciuto 1 s Statement to Congress

The House Committee Report indicates that Riconosciuto
provided a sworn statement to Committee investigators on April 4,
1991. we have not been able to obtain from the Committee a copy of
Riconosciuto' s statement. There are references in the report,
however, to certain statements attributed to Riconosciuto.
According to the report, Riconosciuto told the Committee that he
received a copy of the proprietary version of PROMIS from Brian,
who had obtained it from videnieks. The report says Riconosciuto
claims that someone (the report does not say who) loaded the PROMIS
software into the trunk of Riconosciuto' s car during a luncheon
attended by both videnieks and Riconosciuto. The report says
Riconosciuto granted the Committee access to a storage facility
containing computer tapes and documentation. The Committee then
analyzed these tapes to determine if they contained any versions of
PROMIS (presumably because Riconosciuto indicated that they would) .
According to the Committee's report, their expert analysis of the
tapes failed to provide any evidence that the tapes contained any
versions of PROMIS.

Finally, Riconosciuto told the Committee that the DEA had
seized from him at the time of his March 29, 1991, arrest two
copies of a tape recording he made of his conversation with
videnieks, in which Videnieks threatened to "punish" Riconosciuto

- 46 -

for cooperating in the inslaw investigation. The report does not
make clear whether Riconosciuto told the Committee that those were
the only two copies of the tape that existed.

(iv) Riconosciuto 1 s Testimony At His Trial

The most recent statements made by Mr, Riconosciuto of which
we are aware (outside of this investigation) were made at his trial
for manufacturing and distributing methamphetamine, which took
place in federal court in Tacoma, Washington, in January 1992.
Riconosciuto testified at length about the alleged theft of PROMIS
software at his trial because his defense to those drug charges was
that he was being "set-up" by the government on the drug charges as
punishment for his giving testimony about the Inslaw matter. 27

In his trial testimony Riconosciuto said that he first learned
of PROMIS while on the Cabazon reservation in Indio, California.
He said that he had received three versions of PROMIS, two with
enhancements and one without, and that he had received them from
John Philip Nichols 28 when "Peter Videnieks showed up on the
reservation. " Riconosciuto said that he had set up a VAX computer
in a small mobile office that was behind the casino on the Cabazon
reservation in order to work with the PROMIS software. He said he
then worked with a lead programmer in supervising "programming

27 The jury rejected Riconosciuto 1 s testimony, and convicted him
on the charges of manufacturing and distributing methamphetamine.
The trial judge sentenced Riconosciuto to 360 months imprisonment,
which was the lowest available sentence under the applicable
sentencing guidelines i

28 Nichols was the non-Indian Administrator of the Cabazon' s
affairs .

- 47 -

groups" that were developing modifications to PROMIS. When asked
when these modifications to PROMIS were taking place, Riconosciuto
twice stated that it was in the period of late 1981 to early 1983.
He said that during this period he was commuting between Indio, and
Hercules and Santa Rosa, California, where he had other technical
developments ongoing. Riconosciuto described Earl Brian as someone
he would often see in regards to the PROMIS software when
Riconosciuto was at the Cabazon reservation.

Riconosciuto testified that in February 1991 he had received
a message on his answering machine from someone named Peter, and
that the message instructed him to "be at a certain restaurant at
a certain time and wear, you know, a yellow shirt." Riconosciuto
said he went to this restaurant and was met there by some people,
all of whom he did not know, except for one man he recognized as a
person named "Norm. " Riconosciuto said that Norm and the others
then placed a call and gave him the phone. Riconosciuto said he
expected to hear a person named Peter zokosky on the phone, but
that he didn't recognize the voice at the other end of the call.
According to Riconosciuto, when he told the people who had placed
the call that he didn’t recognize Zokosky' s voice, one of those
people said, "It's no wonder, this is Videnieks."

Riconosciuto then testified that Videnieks told him that he
"was making some people nervous," and that there might be problems
for Riconosciuto in connection with a savings and loan matter and
his wife's custody battle with her former husband if Riconosciuto
didn't "just wise up ... and forget about what [he] was talking

* 48 -

about. "

Riconosciuto said that he understood Videnieks comments to
be a reference to the prospect of Riconosciuto testifying in
connection with the House Committee's then ongoing investigation.

Riconosciuto testified that he had made a tape recording of
this February 1991 call from videnieks. 29 He said that the DEA
agents that arrested him had seized two copies of that tape. He
said that the original of the tape still existed, but that he was
"not sure" where it was.

Riconosciuto also claimed that an associate of his had turned
over computer tapes to the House Committee under Riconosciuto' s
"partial" direction. Riconqsciuto said those tapes contained
"information related to PROMIS software and other financial
information."

b. The Inconsistencies Within The Allegations
Before reviewing the results of our investigation, it is
important to note that Riconosciuto ' s various accounts of his role
in the alleged theft of PROMIS have not remained constant. He has
been inconsistent both in his descriptions of from whom he received
the software, and in his descriptions of when and where he altered
the software. Also, it appears that the circumstances of his
meeting videnieks have not always been described in the same way.

in his affidavit, Riconosciuto said that he had received a
copy of "the proprietary PROMIS computer software product" from
Earl Brian. It is clear from the affidavit that Riconosciuto is

29 He did not explain how he managed to tape record a call
placed by someone else from a public restaurant.

- 49 -

referring to a single copy of software. (" The copy of PROMIS on
which I worked came from the U.S. Department, of Justice. Earl
Brian made it available to me through wackenhut after acquiring it
from Peter Videnieks. In the House Committee Report there also
is a reference to a single incident, where "enhanced PROMIS" was
loaded into the trunk of Riconosciuto' s car. By the time of his
trial, however, Riconosciuto was claiming that he had received
three versions of PROMIS, and that he received "them" from John
Philip Nichols. This testimony clearly is not consistent with the
affidavit, and from what we can tell is inconsistent with
Riconosciuto' s statement to the House Committee.

Riconosciuto also has varied in his descriptions of when and
where he altered the PROMIS software. In his affidavit he said
that during "1983 and 1984" he "performed the modifications to
PROMIS in Indio, California; Silver Spring, Maryland; and Miami,
Florida." At trial, however, he described himself as a supervisor
of a lead programmer and programming teams , and mentioned only work
done in Indio, California, in a mobile trailer behind the casino on
the Cabazon reservation. He also testified at trial about when
these alleged modifications took place:

Q: And how long did it take you to perform these

enhancements to the software?

A: I was working on this for approximately a year

and a half.

Q: Between what times would that have been?

A: From late 1981, it was November 1981, into the

early part of '83.

- 50 -

Riconosciuto then went on to describe some night vision and heat
transfer technology that he was working on, and that he took back
down "to the cabazon reservation in the form of, you know, a
business joint venture." He was then asked about the timing of
his work on this other technology:

Q: Is this about the same time that this PROMIS

software is being --?

A: This is in 1980 and '81 and '82 this is all

happening.

Q: This is all happening simultaneously?

A: Yes.

These statements directly contradict Riconosciuto* s claim in his
affidavit that the work was done in 1983 and 1984. The change in
timing is significant. Riconosciuto' s statement that he started
work on PROMIS in late 19 81 and finished in early 1983 is
inconsistent with the undisputed facts concerning the EOUSA
contract. It is undisputed that Inslaw did not produce a copy of
enhanced PROMIS to DOJ until April 20, 1983. Indeed, Inslaw did
not even enter into the EOUSA implementation contract until March
of 1982. it would have been physically impossible for anybody from
DOJ to produce anything but a public domain version of PROMIS in
November 1981.

Immediately after Riconosciuto testified that his work on
PROMIS was going on simultaneously with other projects (during
1980, 1981 and 1982), he was asked about where he was working

during the period that he claimed to be working on the PROMIS
conversion and the other technologies:

- 51 -

Q: So your focus wasn't totally on the PROMIS

software at this time. You were doing other
things?

A: Absolutely. I was spread thin.

Q: Without going into what each of these various

ventures were, state the ventures you were
involved in at that period of time?

A: Well, we had a small mining company up in

Grass Valley where we had our pilot plant
equipment for recovery technology going. we
had a small pilot plant going in Hercules
[California] at our facility there. we had
Hercules Research and the Interprobe joint
venture, we were developing prototypes for a
high voltage power supply. And I was involved
with -- I was responsible for all the
development work at Sonoma engineering and
research on the night vision system and on a
small satellite dish communications package.

Q: So all this is going on at the same time as

the PROMIS software is being enhanced?

A: Right. I was working between the facility at

Hercules, the facility in Santa Rosa, and the
facility in Indio on the Cabazon reservation.

And I was, you know, flying -- there was an
airport at concord [California] , which was
just five minutes away from where we were at
Hercules, and, you know, I was on a weekly
basis, I was making the round robin.

Q: How much of that time would you be devoting on

the Cabazon reservation?

A: I would say roughly a quarter of my time at

that time. And I would say roughly half of my
time at Hercules and -- no, about a quarter of
my time at Hercules and the balance of my time
between the Santa Rosa facility and other
miscellaneous projects.

Thus, when asked directly about where he was working during the
period he was converting PROMIS, Riconosciuto failed to mention
Silver Spring, Maryland, and Miami, Florida, two of the three
places where he had claimed in his affidavit that he converted

- 52 -

PROMIS. In fact, Riconosciuto did not mention Maryland or Miami
anywhere in his testimony about PROMIS at trial . 30

Neither in his initial calls to the Hamiltons nor in his
affidavit did Riconosciuto identify where he first met Videnieks.
According to the House Committee Report, he told them that he first
met Videnieks at the Picatinny Arsenal, which is in Dover, New
Jersey. This part of his story also changed at trial, however.
The following exchange took place on direct examination of
Riconosciuto:

Q: Have you met Peter videnieks?

A: Yes I have.

Q: On how many occasions?

A: At least a dozen occasions.

Q: where was the first place you met him?

A: In Indio, California.

c. Results Of Our Investigation

We, of course, spoke directly with both Earl Brian and Peter
Videnieks. Each of them has categorically and under oath denied
all the allegations made by Riconosciuto about them. They both
stated that they had never met Riconosciuto, or each other, and
that they had never been to Indio, California, either to the
Cabazon reservation or to the Cabazon's offices within the city.

30 ln addition, the Hamiltons' memoranda of their call from
Riconosciuto indicate that Riconosciuto claimed that his Houston
based computer company modified PROMIS. We cannot tell from those
memoranda, however, if Riconosciuto was specific about where the
alterations took place. At trial he made no mention of any
alteration of PROMIS in Houston, or of a role played by his Houston
based company.

- 53 -

We found both men to be credible witnesses, both in their demeanor
and in the substance of their statements.

We then interviewed a number of people whom Riconosciuto
identified as having knowledge of the activities involving PROMTS
at the Cabazon reservation. Included within that group are Peter
Zokosky, A. Robert Frye, John Philip Nichols, 31 and Robert Nichols.

We also interviewed Art welmas {the former Tribal Leader of the

Cabazon Band of Mission Indians) and his wife, Sam Cross {retired

Material Omitted Pursuit tn
Chief of the Indio Police Department), p «_■ v> 0

M trim. Jr. b(e)

.Fed* ' Pursuan ‘ t and a number of other individuals,

■ted. R. Crim. P. 6(e)

in order to determine whether it was likely, or even possible, that
Riconosciuto and others were involved with altering PROMIS at the
Cabazon reservation. The evidence we have compiled to date
suggests that: {1) Riconosciuto was in fact in Indio, California

during the early 1980s; (2) Riconosciuto did work with John Philip
Nichols and the Cabazons; and (3) the Cabazons did enter into a
joint venture with wackenhut Corporation. That is where the truth
in Riconosciuto' s story stops. The evidence contradicts
Riconosciuto’ s testimony about PROMIS, and suggests that there were
absolutely no activities undertaken by wackenhut, Riconosciuto, or
the Cabazons that had anything to do with PROMIS or any other
computer software.

31 we spoke to John Nichols for a brief period in his home. He
was not expecting us, and was not comfortable (in light of his past
criminal problems, apparently) having an extended interview without
his lawyer present. He was, however, willing to comment freely
about Riconosciuto and the allegations he is making.

- 54 -

(i) The Wackenhut -Cabazon Joint Venture

The Cabazon Band of Mission Indians is a very small tribe
located in Indio, California, which is just east of Palm Springs.
As of 1981 there were approximately 30 voting members of the tribe.
Arthur Welmas was the Tribal Chairman at that time. A non- Indian
man, John Philip Nichols, was the Tribal Administrator and managed
the business affairs of the tribe. Most of the reservation is
located alongside the interstate in Indio. During the early 1980s
the only building located on the reservation was a casino building.
Behind the casino was a small mobile trailer of the type usually
found on construction sites. The trailer was used as a small
office for the Cabazons and the casino operation.

During early 1981 the Cabazons formed a company known as
Cabazon Security Corporation ("CSC") . According to A. Robert Frye,
CSC solicited capabilities statements from a number of major U.S.
security firms. Frye, who was then President of Wackenhut
Services, Inc. ("Wackenhut") 32 , responded on behalf of Wackenhut.
Wackenhut was interested in working with the Cabazons because CSC,
as a qualified minority contractor, would be eligible to obtain
government contract work pursuant to various set-aside programs .
Negotiations went forward with Frye participating on behalf of

32 wackenhut Services, Inc. is a subsidiary of Wackenhut
Corporation. Wackenhut Corporation is a publicly traded firm that
provides security and other support services to industrial and
governmental entities worldwide. The firms described by
Riconosciuto in his call to the Hamiltons (Wackenhut Research, Inc.
and wackenhut Security, Inc.) do not exist.

- 55 -

wackenhut, and John Nichols conducting the negotiations on behalf
of the Cabazons .

In April of 1981 Wackenhut entered into a joint venture
agreement with CSC. The agreement was signed by Frye on behalf of
wackenhut, and Tribal Chairman Art welmas on behalf of CSC. The
joint venture agreement indicates that it was the primary purpose
of the joint venture to "qualify for, bid on, and obtain government
guard service contracts." Through Frye's testimony and a review of
wackenhut' s files we identified two government security contracts
on which the joint venture bid, but which it did not receive.

Early on in the joint venture John Nichols indicated a desire
to have the joint venture engage in the sale of night vision
goggles and rifle scopes to foreign governments. We found within
Wackenhut 's files various documents that demonstrate the efforts
Nichols was making to market this night vision equipment to
individuals identified as representatives of the governments of
Guatemala and Honduras. It was Nichols' view that the Cabazon's,
as a sovereign nation, were not subject to the usual export and
import controls. 33 In furtherance of this sales effort, a
demonstration of night vision equipment was held on the evening of
September 10, 1981, at the Lake Cahuilla gun range in Indio,

33 a review of Wackenhut 's files shows that they did not share
Nichols' view. We found internal memoranda in which wackenhut
personnel express their opinion that any sales of night vision
equipment would have to obtain State Department approval. We also
found copies of preliminary applications that Wackenhut filed with
the State Department in anticipation of possible sales of night
vision equipment. As far as we could tell, no sales were ever
made .

- 56 -

California. That demonstration is discussed at length in the
following section.

Another area of possible business that the joint venture
explored was the manufacture and/or sale of combustible cartridge
casings for large caliber cannons. The Cabazons were introduced to
the possibilities of this rather arcane area by Peter Zokosky.

Peter Zokosky is the former President of a Coachella,
California, company called Armtec Defense Products. Zokosky said
that during the early 1980s Armtec was a single source supplier
producing combustible cartridge casings for the United States Army.
According to Zokosky, during 1981 he was retired from Armtec and
was aware that the Army was looking for a second source supplier
for the combustible casings. Zokosky says he then began having
discussions with Nichols about the possibility of the Cabazons
becoming that second source. Ultimately, Zokosky became an advisor
to Nichols and the joint venture as they pursued the possibility of
becoming a second source supplier.

Zokosky said he thinks he first heard the name Riconosciuto
from somebody at Wackenhut, although he cannot say who. 34 He said
he first met Riconosciuto one day in July of 1981 when he went to
see Nichols at Nichols’ office in Indio. He said that he does not
know who introduced Riconosciuto to Nichols. Zokosky said that

34 Zokosky also claims that it was he who first put Wackenhut
in contact with Nichols. This claim is contradicted by other
evidence we found.

- 57 -

Riconosciuto appeared scientifically oriented, and that he and

Nichols took him when they went to visit the Picatinny Arsenal . 35

The Picatinny Arsenal is located in Dover, New Jersey. it
offices the U.S. Army Armament Research & Development Command,
Large Caliber Weapon Systems Laboratory. zokosky and the other
people from the joint venture travelled to the Arsenal to meet with
Dr. Harry Fair and an Army project officer named R. Scott Westley.
zokosky knew both these men from the time he worked at Armtec, and
knew that both could be helpful to the joint venture in its efforts
to establish a second source combustible cartridge production
facility on the Cabazon reservation. The meetings at the Arsenal
were set up to discuss with Fair and Westley both the technical and
administrative challenges of establishing a successful operation.

Frye's recollection of meeting Riconosciuto roughly comports
with Zokosky' s. Frye says he first met Riconosciuto on a trip to
the Picatinny Arsenal. Frye believes this trip was in May of 1981.
zokosky agrees that there was a trip to the Arsenal in May 1981,
but he believes that Riconosciuto was not on that trip. zokosky
says that Frye actually met Riconosciuto on a second trip to the
Arsenal in October 1981. We do not believe that this disagreement
as to the dates is material.

35 Notably, neither Nichols nor zokosky were employees of the
joint venture. Indeed, the joint venture had no employees at any
time. The only individual employed by Wackenhut was Frye. We
found no evidence to support Riconosciuto' s claim that he and Earl
Brian were employed by Wackenhut or by the joint venture. Any
business relationship Riconosciuto had was between him and Nichols
and/or the Cabazons.

- 58 -

Frye and zokosky agree on a number of points that are relevant
to this investigation, however. Both agree that they neither saw
nor heard about Earl Brian in connection with the joint venture.
Both agree that they never saw Riconosciuto conducting any computer
operations. Both agree that they never saw any large computers or
computer facilities anywhere on the reservation or in the Cabazon
offices during this period.

We also interviewed Art Welmas, who was the Tribal Chairman
during the time of the joint venture, and his wife, welmas and his
wife both said they never saw or met anyone named Earl Brian at the
reservation, and that they never heard the name Earl Brian
mentioned by Nichols, Riconosciuto, or anyone else at the
reservation. They also told us, as did everyone we talked to, that
the Cabazons had no large computers during this time period, either
in the mobile trailer behind the casino or in the offices in the
city of Indio. 36

Sam Cross, the Chief of the Indio Police Department during the
years Riconosciuto was in Indio, told us that he had personally
been in the mobile trailer behind the Cabazon' s casino, which
Riconosciuto described in his trial testimony. He was quite sure
there never was any computer equipment in the trailer. He also
told us that he made a point of staying aware of what was going on

at the Cabazon reservation during that period, and that he never

. . _ . . „ , „ . Iktsrial Omitted Pursuant

heard any mention of the name Earl Brian.

Fed. R. Crim. P.

“witnesses told us that the Cabazons obtained small personal
computers for word processing later in the 1980's.

- 59 -

Material Omitted to
Fed. R. Criui.

Considering the extremely small size of the Cabazon
reservation, if there had been any computer software modification
project going on at the reservation, we are confident these
witnesses would have known about it.

John Nichols was emphatic that Riconosciuto' s allegations
concerning PROMIS are fabricated. He said that there never was any
computer equipment around the reservation or the tribal offices,
and that he had never heard of Earl Brian or any of his companies
prior to Riconosciuto' s allegations . 37

In summary, we were not able to find any witness who could
even corroborate that Riconosciuto had access to computer equipment
while on the Cabazon reservation, much less that he was involved in
the modification and distribution of software for Earl Brian. In
fact, the evidence is to the contrary. The evidence is that
Riconosciuto was working with Nichols and the Cabazons in
connection with their efforts to establish various quasi -military
business opportunities for the joint venture.

37 We should note that Riconosciuto has made numerous
allegations throughout his life claiming that John Nichols is
involved with various nefarious and criminal enterprises. While we
do not assume the truth of these allegations, Nichols arguably
would have a motive to call Riconosciuto a liar. We note, however,
that everything Nichols told us was consistent with the great
weight of the evidence we obtained from other sources.

- 60 -

(ii) The September 10, 1981 Weapons
Demonstration

The House Committee Report said that it was aware of a
Riverside California police report that indicated that Earl Brian
was present at a shooting demonstration at the Lake Cahuilla gun
range in Indio, California, on September 10, 1981. According to
the police report, the purpose of the demonstration was to test a
new night vision device (of the type that the joint venture was
trying to market) . The report identifies by name 16 people who
were present at the gun range (and four police officers who were in
the surrounding hills conducting surveillance) , including Peter
Zokosky, Michael Riconosciuto, John Nichols, Art Welmas, Sam Cross,
and Earl Brian. Brian's presence at this demonstration would be
significant because he has steadfastly denied ever having been to
the Cabazon reservation, or ever having met Riconosciuto or any one
affiliated with the cabazons.

We located the report to which the Committee referred. It is
a singularly unusual document. It is a four page report on a
"Special Operations Report" form, under the heading "Subject" it
lists "Cabazon Indians." The title of the report is "Nicaraguans
and Earl Brian at Lake Cahuilla - 9/10/81." The typing date of the
report, however, is ten years later, on "10/10/91." Although the
word "intelligence" appears at the top of the first page, from a
quick reading of the report one is given the impression that it is
a surveillance report. This results, in part, from the fact that
the report lists no informants or sources, or in any other way
indicates that • the information in the report is something other

- 61 -

than a law enforcement officer's observations. Also, the report
contains various license plate numbers and automobile registrations
for the cars that were observed at the demonstration, just as one
would expect to find in a regular police surveillance report.

We were intrigued by this report, and thought it might be the
key to our finding evidence that would corroborate Riconosciuto.
Such was not the case. What we found was that all the information
in that report, save for the license plate numbers and the
registrations, came from Riconosciuto.

The report was prepared by Gene Gilbert, an investigator for
the Riverside, California, District Attorney's Office. we
interviewed Gilbert. He told us that he prepared the report in
1991 after interviewing Riconosciuto in jail. He said that the
purpose of the interview was to find out if Riconosciuto could
provide any information about an unsolved murder that happened in
Indio in 1981. He said that he had obtained the license plate and
registration information from Dave Baird, a former Indio police
officer who was present at the demonstration, and who had saved
this information over the years .

The Riverside County District Attorney's Office was not
pleased with all the attention this report had brought to them.
The problem was that the report had been leaked, and virtually
every reporter interested in the Inslaw case had a copy of it, as
did many private citizens. 38 When we met with Gilbert he told us

30

Material Omitted I'urs'ia.it to
Fed. R. Crim. P. 6(e)

• 62 -

words to the effect of "if I had known what a stir it would cause
I would have left Earl Brian's name out, because he has nothing to
do with the murder investigation." We found it difficult to
believe that the mention of Earl Brian's name was coincidental.
For example, we asked Gilbert why he put Earl Brian's name in the
title of the report. He said it was because Brian was a new name
to the investigation. When we pointed out that there were a lot of
names in the report that were new to his investigation, Gilbert had
no explanation as to why their names were not in the title. We
also never received an explanation as to why Gilbert did not
mention Riconosciuto in the report as the source of the
information, or why Gilbert created a separate report concerning
everything else Riconosciuto told him in the interview.

Gilbert told us that after he began to get numerous inquiries
from the press about the report, it became apparent to him that the
name in the report that everybody was most interested in was Earl
Brian. He said at that point he decided to see if anybody besides
Riconosciuto would say Earl Brian was there. Gilbert then went to
see Dave Baird, the officer from whom he had obtained the license
plate numbers. After meeting with Baird, Gilbert prepared another
report saying that he had shown Baird a photograph of Brian, and
that Baird had identified Brian as being one of the individuals at
the gun range on September 10, 1981. We went to see Dave Baird.
That is not what he told us.

Dave Baird is now a Riverside County Deputy Sheriff. During
1981 he was an officer with the Indio Police Department. He told

- 63 -

us that shortly before September 10, 19 81, he was told by then
Police Chief Sam Cross that City Manager Phil Hawes had arranged
for a demonstration by the Cabazons to take place at the Lake
Cahuilla gun range. Baird said that Hawes and Cross asked him to
be present at the demonstration to determine if the Cabazons were
engaged in any illegal activities involving automatic weapons. He
said that when he went to the demonstration he was suspicious about
what was going on, and so he memorized the license plates of some
of the cars that were there. When the demonstration was over he
checked the registrations of the plates he had memorized. We
obtained a copy of the registration printouts he ran.

One of the cars at the demonstration was a Rolls Royce that
belonged to a real estate developer named Wayne Reeder. According
to Riconosciuto (as reported in Gilbert's first report), Wayne
Reeder arrived with Earl Brian. Baird said that he remembered that
Reeder did arrive with someone, but that he didn't know who it was.
Baird's handwritten notes that he made when he originally ran the
registrations, however, refer only to Wayne Reeder in the Rolls
Royce. 39 We then asked Baird if he had previously told
investigator Gilbert that the other occupant was Earl Brian. Baird
said he did not. Baird told us that Gilbert showed him a poor
quality photocopy of a picture in a magazine, which Gilbert said
was Earl Brian. Baird told us that the most he could say was that
the person in the magazine photograph had the same general physical

39 The absence of such an indication in his notes is
significant, because his notes for other cars indicate that they
had multiple occupants in them.

- 64 -

When asked

characteristics as the person who was with Reeder . 40

what those physical characteristics were, Baird said, "large,

middle-aged, white, male." We then asked Baird if he thought he

could identify Brian if we showed him a clear photograph of Brian

taken in 1981. He said that the most he ever would be able to say

was whether the person had the same general physical

characteristics as the occupant of the car. This hardly

constitutes an identification of Brian. _ rafted pursuant

Material p.

We also spoke with Peter Zokosky, red* ^ayne Reeder,
John Nichols, and Art Welmas, all of whom were at the September 10,
1981 demonstration. While they have somewhat conflicting
recollections of the event 41 , they all agree on one point: Earl
Brian was not there. When asked if there were any people at the
shooting they did not know, they mentioned only some unidentified
Spanish speaking men that Nichols had invited, all of whom were
Hispanic and do not fit Brian's description. We also talked to
Scott Westley of the Picatinny Arsenal, who Riconosciuto identified
as being there. He absolutely denies being at the demonstration.
Given that Westley makes no attempt to hide the fact that he met on

40 Given the nature of the identification attempted by Gilbert- -
a one person photo "show-up" ten years after the witness saw the
subject on one occasion, at dusk- -we suspect that even a positive
identification by Baird would be inadmissible in court.

41 For example, Reeder recalls that he had a date that night,
and for that reason believes he came alone, zokosky also recalls
Reeder having to get to a date that night, but says that he thinks
he drove Reeder there, and that's why Reeder couldn't get to his
date until the demonstration was done. It seems more likely that
Zokosky is mistaken, given that Baird is quite certain he saw
Reeder’s car there, and in fact "ran" Reeder's license plates.

- 65 -

occasion with the people from the joint venture, it seems he would
have little motive to lie about whether he was at this
demonstration.

In summary, Riconosciuto ' s allegation that Earl Brian was at
the demonstration at the Lake Cahuilla gun range does not withstand
scrutiny. The credible evidence is overwhelming that Brian was not
there. Moreover, we obtained considerable evidence tending to show
that Brian was in his New York office on September 10, 1981. we
obtained a copy of Brian's personal calendar from 1981. In it is

the handwriting of Brian's former personal assistant. The personal

. . Material Omitted Pursuant to

assistant's writing, Fed. p> 6{eJ

indicates that Brian flew from Washington to New York on the

afternoon of September 9, and that she (the personal assistant)

ordered a limousine to take Brian between his New York office and

his home on September 10. Brian's expense records, including an

airline receipt for the trip from Washington to New York, indicate

that the calendar is accurate for that week.

(iii) Riconosciuto' s March 29, 1991 Arrest

Riconosciuto and others have suggested that the timing of his
19 91 arrest on drug charges, coming as it did only eight days after
he executed his affidavit in the Inslaw case, demonstrates that the
government was retaliating against him for his testimony. As
already noted above, Riconosciuto' s defense at his drug trial was
that he was being framed by the government.

We reviewed the entire transcript of Riconosciuto ' s trial,
along with many of the DEA reports, and spoke with the Assistant

- 66 *

united States Attorneys who prosecuted the case against
Riconosciuto. We are convinced beyond all doubt that there was
absolutely no connection between Riconosciuto' s prosecution and his
allegations in the Inslaw matter. The fact of the matter is that
the case that resulted in Riconosciuto ' s arrest and prosecution
began as a local drug investigation by Washington State
authorities. As part of that local investigation a small time
me thamphet amine dealer began to cooperate with the police. It was
only after the local authorities determined that the supplier of
the cooperating drug dealer was distributing on a large scale, that
they decided to call in the Seattle office of the DEA to assist in
the investigation. There is no evidence that anybody from
Washington, D.C., either from DOJ or elsewhere, had anything to do
with the prosecution of Riconosciuto in Tacoma.

In addition, the evidence against Riconosciuto at trial was
overwhelming. The DEA in that case captured Riconosciuto
delivering me thamphet amine on videotape on more than one occasion.
The testimony also established that Riconosciuto was running a
large methamphetamine lab at the property where he was living.
Riconosciuto testified that the case was a set up, that the DEA had
altered the videotapes to make it appear that he was where he
wasn’t, that the government had altered telephone records, and that
his lab was only for mining metals, not for making drugs. It is
not surprising that the jury rejected this testimony. It was as

- 67 -

unbelievable then as it is now. 42 Even the judge commented at
sentencing that he was not sure whether Riconosciuto could tell
fact from fiction.

Material Omitted Pursuant to
Fed. R. Crim. P. 6{e)

42 Claiming that he is the victim of a frame up is nothing new
to Riconosciuto. When he was arrested, tried, and convicted on PCP
charges in the early 1970s, Riconosciuto ' s defense was that someone
had planted the PCP on him.

- 68 -

Material Omitted Pursuant to

•Fed. fi. Grim. p. 6(e) Riconosciuto (along with two local

gadflies) filed a lawsuit purporting to challenge the authority of
this investigation. Included within the bizarre allegations of the
lawsuit were claims that I was involved in various organized crime
murders and that one of the FBI agents assigned to the case had
murdered the journalist Danny Casolaro. Riconosciuto also claimed
that my staff had threatened to kill him, and that he and his
family were in danger.

43

Material Omitted Pursuant to
Fed. R. Crim. P. 6(e)

<3 Riconosciuto' s lawsuit was subsequently dismissed by the
district court as patently frivolous. Riconosciuto v. Bua , No. 92
C 6217 (U.S.D.C. N.D. 111.)

- 69 -

Material Omitted Pursuant to
Fed., H.. Crim.. P.. 6(e),

- 70 -

Based on

Mate J i J al i )niitted Pursuant

to

his

Fed. R. Crim. P. 6(e)

dealings with the Congress, the Hamiltons, and reporters, we do not
believe that Riconosciuto in fact has any of the evidence he claims
to have about PROMIS.

Purs uant to
Fed., R* .Grim. p. 6(e)

Yet

Riconosciuto was out of prison for almost a year after his initial
call to the Hamiltons. During that period he never produced the
1099 forms, the photographs of him and Earl Brian in Iran, or the
version of PROMIS he told the Hamiltons that he would give them.
Riconosciuto also has had enough contact from prison with people on
the outside that he was able to arrange for the House Committee
investigators to get access to what he claimed at trial was
software tapes containing PROMIS. Congress, too, came up empty-
handed .

in analyzing Riconosciuto' s allegations we have attempted to
focus on the substance of his claims and whether they are supported
or contradicted by other evidence. We cannot entirely ignore
certain general credibility issues, however. Riconosciuto was
involved with hallucinogenic drugs at least as far back as 1972,
when he was convicted on a PCP charge. In addition to that charge

Material Omitted Pursuant to
Fed* R., .Grim., p., 6(e).

and his 1992 drug conviction, NCIC records indicate he also has
burglary and bail jumping convictions from the early 1970s.

Most people who know Riconosciuto told us that he displays a
high degree of familiarity with scientific and technical concepts.
None of the people we talked to, however, could confirm the
extraordinary claims Riconosciuto makes about his past exploits.
He claims, for example, to have workejd with the CIA, to have
developed a radio detonator device used to overthrow the Allende
government in Chile, to have patented various revolutionary
devices, to have recovered computer data from computers damaged
during the overthrow of the Shah, to have personally been involved
in handling the so-called "October Surprise” payments, and to have
convinced certain organized crime members associated with Tony
Accardo {a now- deceased head of the Chicago mob) not to commit a
murder. We came across no credible witness who could confirm any
of this.

In conclusion, we found Riconosciuto to be a totally
unreliable witness in connection with the allegations he has made
about the alleged theft of PROMIS software. Riconosciuto ' s story
about PROMIS reminds us of a historical novel; a tale of total
fiction woven against the background of accurate historical facts.
For example, it is true that there was a Wackenhut-Cabazon joint
venture, and that there was a demonstration in September 1981 at a
gun range in Indio. The overwhelming weight of the evidence,
however, is that Earl Brian had nothing to do with either of these
events. Riconosciuto* s efforts to place Brian at the Cabazon

- 72 -

reservation and at the center of a conspiracy to steal PROMIS do
not withstand any level of scrutiny.

Material Omitted Pursuant to
Fed., B.. Crim. P. 6{e)

2. Ari Ben-Menashe

Ins law also has claimed that Ari Ben-Menashe has personal
knowledge of Earl Brian's distribution of inslaw 1 s PROMIS software.
Based on our investigation, we conclusively reject that assertion.

We met with Ben-Menashe on a number of occasions

Material Omitted Pursuant to Ben-Menashe makes a number

'' v Fed., R.j Crim.. P. 6(e)

of extraordinary claims, most of which are not subject to
corroboration. One thing Ben-Menashe absolutely does not say,
however, is that he has any information about DOJ or Earl Brian
distributing Inslaw's software. To the contrary, the story Ben-
Menashe now tells involves what he says is a different PROMIS
program, software that is not Inslaw's. Ben-Menashe claims that
Earl Brian has been travelling around the world peddling software,
also called PROMIS, that was developed not by Inslaw, but by the
United states National Security Agency (NSA) .

a . Ben-Menashe 's Previous Allegations

Inslaw submitted to the Bankruptcy Court two affidavits
executed by Ari Ben-Menashe. In the first affidavit, dated
February 17, 1991, Ben-Menashe claimed to have been personally

present at a 1987 meeting of the External Relations Department of
the Israel Defense Forces, "during which Dr. Earl W. Brian of the
United States made a presentation intended to facilitate the use of

- 73 -

the PROMIS computer software." Ben-Menashe' s affidavit states that
Brian said at that meeting that he owned the rights to PROMIS, and
that Brian had been allowing the CIA, the NSA, DOJ, and the
"Israeli intelligence communities" to use PROMIS since 1982.
According to this affidavit, in 1987 Brian consummated the sale of
PROMIS to the Israeli government "for internal use as well."
Finally, in his first affidavit Ben-Menashe claimed that in 1989,
in Chile, he was told by a Carlos Carduen that Carduen had brokered
a sale of PROMIS by Earl Brian to a representative of Iraqi
Military intelligence.

Ben-Menashe' s second affidavit, dated March 21, 1991,
describes a 1982 meeting Ben-Menashe says he had with Rafael Eitan,
who he says was the Israeli Prime Minister's Anti -Terrorism Advisor
at the time. Ben-Menashe ' s affidavit describes that meeting as
follows:

in a meeting that took place in December
1982 in Mr. Eitan' s office in the Kirya in Tel
Aviv, Israel, Mr. Eitan told me that he had
received earlier that year in the United
States, from Mr. Earl W. Brian and Mr. Robert
McFarlane, PROMIS computer software for the
limited use of the [Israeli Defense Force's]

Signals Intelligence unit for intelligence
purposes only. Mr. Eitan stated on this
occasion, and on earlier occasions as well,
that he had special relationships with both
Mr. Brian and Mr. McFarlane.

According to the House Committee Report, investigators for the
Committee interviewed Ben-Menashe in May 1991. The report states
that Ben-Menashe gave testimony that was essentially consistent
with his affidavits. Specifically, Ben-Menashe is reported to have
said that "in 1982, Dr. Earl Brian and Robert McFarland [ sic ] , the

- 74 -

former Director of the National Security Council, provided the
public domain version of iNSLAW's PROMTS software to the Israeli
Government's special intelligence operation Defense Forces."
(emphasis added) The Report says that Ben-Menashe described the
1987 sale by Earl Brian of "Enhanced PROMIS" to the Israeli
intelligence community and the Singapore Armed Forces. According
to the Committee Report, Ben-Menashe also claimed to have
information about the sale of a "public domain" version of PROMIS
by the Israeli government to the Soviet Union, and of the sale by
Earl Brian of "the enhanced version" (apparently of the public
domain software) to Canada. The House Committee Report does not
identify any witnesses or documents corroborating Ben-Menashe' s
testimony about PROMIS.

b. Our investigation

In our meetings with Ben-Menashe he told a different story. 47
Ben-Menashe told us that from 1974 through 1977, he was in the

47 We confined our investigation to Ben-Menashe ' s claims that
related to DOJ misconduct in the use or distribution of PROMIS. As
noted by the senate Special Counsel's Report, Ben-Menashe ' s claims
have been wide-ranging. According to the Special Counsel's Report,
in addition to the October Surprise allegations investigated by the
Senate and those relating to Inslaw and PROMIS,

Ben-Menashe claims to have had a role in the Mossad's
kidnapping of a renegade Israeli nuclear technician,
Mordecai Vannunu; in the Israeli raid on Entebbe Airport
in Uganda in 1976; and in the Israeli attack on Iraq's
nuclear reactor in 1981. Ben-Menashe says he was the
first person to leak the iran-contra scandal to the
press ....

We did not have the time, manpower or mandate to investigate each
of Ben-Menashe' s claims about his adventures.

- 75 -

Israeli military assigned to the Iranian Desk of the Signals
Intelligence Unit. In that position, he had access to a software
program called "Milon" (phonetic) , which he stated was a computer
program used to compile dictionaries. Ben-Menashe said that the
Israeli government used the program to develop a Hebrew -Farsi
dictionary and to assist in the translation of Farsi documents by
his unit. He stated that the United States NSA developed the
Milon program to translate Vietnamese into English. According to
Ben-Menashe, William Hamilton worked on this program while employed
at the NSA, long before the formation of Inslaw. 48

Ben-Menashe told us in no uncertain terms that he has
absolutely no knowledge of the transfer of ins law’s proprietary
software by Earl Brian or DOJ. According to Ben-Menashe, the
" PROMIS" program he referred to in his previous affidavits and
statements is not Inslaw's PROMIS. Instead, he says, the "PROMIS"
program delivered to Israel by Brian was developed and enhanced by
NSA. Ben-Menashe was adamant that this "other PROMIS" was
developed by NSA independent of any Inslaw program and years prior
to the formation of Inslaw. He also insisted that he has never
said otherwise to the Hamiltons, to Congress, or to anyone else.
When we asked Ben-Menashe about Inslaw's PROMIS, he said he had no
information that Inslaw's software was pirated by DOJ and no reason

to believe that DOJ did anything improper with the PROMIS software

/

4B We requested confirmation of this from NSA. NSA informed us
that William Hamilton worked for NSA in the 1960s. Because
Hamilton's personnel records had been purged, however, NSA was
unable to tell us whether he had worked on or developed such a
program while at NSA.

- 76 -

provided it by Inslaw. He was quite specific in saying that he did
not believe that DOJ had distributed Inslaw’s software to any other
person or entity.

While these statements by Ben-Menashe appear to contradict
everything Ben-Menashe has previously said on this subject, Ben-
Menashe says no. According to Ben-Menashe, he simply let the
Hamiltons and others ’'assume" that he was referring to Inslaw's
PROMIS when he discussed the PROMIS program that he says Earl Brian
distributed, even though in his mind he was referring to the
different software program developed by NSA. Ben-Menashe said that
he never affirmatively asserted that the software he was referring
to was Inslaw’s PROMIS. 48

* Purs hant to

Fed., R. ; Crim. p. -

6(e)

Su We believe that the apparent contradiction in Ben-
Menashe’ s statements is best explained by his own statement
regarding his motivation in signing the Inslaw's affidavit. Ben-

48 The House Committee Report clearly states that Ben-Menashe
referred to "inslaw's PROMIS." Because we do not have a copy of
the testimony Ben-Menashe gave to the House Committee, we cannot
know whether he is now misstating what he told them, or whether the
investigators misinterpreted what he said.

50

Material Omitted Pursuant to

-fed., R.j Crim. P. 6(e) Ben-Menashe also claimed that the
Hamiltons had repeatedly urged him to sign affidavits that
specif icallv referred to "Inslaw's PROMIS," but that he always
refused.

Material Omitted Pursuant fj

«. Cria., X. s(ej

- 77 -

Menashe admitted that one of the reasons he failed to clarify his
statements was because he was preparing to publish a book about his
various exploits and he wanted to make sure that his affidavit was
filed in court and came to the attention of the public. 51

In his book Ben-Menashe claimed to have knowledge of a complex
web of foreign and domestic intelligence agencies that use the NSA
developed PROMIS to gather intelligence from banks and governments
around the world and to move moneys in payment for arms sales and
other nefarious activities. According to Ben-Menashe, Israel
installed a "trap door" in the NSA version of PROMIS. After the
program was distributed worldwide by Earl Brian and others to
various private and governmental users, the "trap door" allegedly
permitted intelligence agencies to access the users' databases to
obtain confidential information. Ben-Menashe claimed that by
employing this "trap door" he had learned that friends and
relatives of President Bush and other Administration officials were

involved in the supply of arms to Iran for prpfJ.fe> ur s U aht to

material Omrt e

Although we requested, Fe&.> W 1IQ *- TSfen-Menashe for

documentary evidence to support any of his allegations, and
although he claimed to have access to such documents in safekeeping

with a publisher in Australia, he failed to produce any documents.

Material Omitted Pursuant to
^ Fed„ £« £rim. J P., 6(e).

51 The book was published in June 1992.

- 78 -

We were not disposed to conduct an international search of

foreign governments and intelligence operatives on the basis of

Ben-Menashe' s allegations. Even if one believes Ben-Menashe- -and

we certainly are not sayingQ^^.^c^ 2 ptilif«'u©?^et§ no evidence of any

Mater-2. Crim _ p. 6(e) . ,

wrongdoing by DOJ. Tea. n. he emphasized his lack of

any knowledge and any information suggesting any distribution of

Inslaw's software by DOJ.

we did, however, conduct some investigation of Ben-Menashe' s
allegations. Our investigative efforts revealed precious little
evidence to corroborate Ben-Menashe' s story. Earl Brian, under
oath, and Robert McFarlane, in a telephone interview, strenuously
denied the entirety of Ben - Menashe ' s allegations, each
categorically denying any improper connection to the Israeli

52 The House October Surprise Task Force extensively examined
allegations Ben-Menashe has made about the subject of its inquiry.
The Task Force concluded that, although Ben Menashe did work for
the External Relations Department of Israeli Military Intelligence
between 1977-1987, "the evidence . . . shows that he worked the
entire time as a translator of materials of relative insignificance
and low levels of classification." The Task Force Report states
that "[c]ontrary to Ben-Menashe' s claims, his records also reveal
he had no responsibilities involving contacts with the CIA or the
intelligence service of any other country." Furthermore, the Task
Force Report noted that Rafi Eitan, an Israeli official who was the
alleged source of Ben-Menashe' s information in the second affidavit
Ben-Menashe provided to Inslaw, was examined by the government of
Israel at the Task Force's request. According to the Task Force
Report, Eitan stated that he does not know Ben-Menashe, has never
met Ben-Menashe,- and heard of him only after Ben-Menashe began
making his allegations in 1991.

After a thorough investigation, the Task Force described Ben-
Menashe' s testimony variously as "totally lacking in credibility,"
"fabricated," "demonstrably false from beginning to end," "riddled
with inconsistencies and factual misstatements," and "a total
fabrication." The Task Force specifically found "no evidence to
substantiate Ben-Menashe' s allegations regarding a trip to Iran by
Robert McFarlane and Earl Brian."

- 79 -

government or to any version of PROMIS.

Material Omitted Pursuant to
Fed., B.. Crim.. P. 6{e)

We also contacted NSA and asked whether it used or developed
any program called PROMIS. NSA informed us that it used a
commercial off-the-shelf software package that was purchased from
Computer Corporation of America. In 1974-1975, six years before
the incorporation of Inslaw, NSA developed a database with query
search and report features in the M204 language. This particular
database is called PROMIS, an acronym for Product Related On-line
Management Information System. {NSA explained that its
intelligence reports are referred to within NSA as the agency's
"product . " )

NSA has informed us that NSA’s PROMIS has no relationship to
Inslaw's PROMIS and NSA believes that the use of the same name for
the different software is purely coincidental. NSA's PROMIS is
written in a language called M204, a language different from COBOL,
the language used for Inslaw's PROMIS. NSA's PROMIS serves
different purposes than Inslaw's PROMIS, and it is used with a
different database.

NSA's General Counsel's office informed us that many personnel
in the agency know of the existence of NSA's PROMIS and that over
the years many employees with knowledge of PROMIS have moved on to
employment with other agencies in the government and with private

- 80 -

employers. It is not particularly surprising, therefore, that Ben-
Menashe could learn of its existence. 53

we are unwilling to credit the rest of Ben-Menashe' s story
based on his knowledge of the existence of the NSA program.
Frankly, Ben-Menashe ' s story is too incredible to rest on so small
a foundation. It has been convincingly denied by two witnesses
whose statements we believe. We have good reason to doubt the word
of a man who implies that he allowed the use of his plainly
misleading affidavits in order to promote his book's sale.

Finally, we note also that according to Ben-Menashe' s story,
Israel received "PROMIS" from Earl Brian and Robert McFarlane
during or before December 1982. Yet in December 1982 DOJ had
available to it only public domain versions of PROMIS. Inslaw did
not deliver an allegedly enhanced version to DOJ until April 1983.

It is clear to us that Ari Ben-Menashe offers no

support for the allegation that DOJ and Earl Brian conspired to
steal and distribute the software in which Inslaw claims
proprietary rights.

3 . Charles Hayes

Material Omitted Pursuant to
" Fed* E„ Crinu P.. 6(e).

Hayes is a Nancy, Kentucky, salvage dealer who was contacted
by William Hamilton after Hayes* own disputes with DOJ were

53 We received this information by telephoning the NSA. The
General Counsel's office indicated that NSA has not distributed
NSA's PROMIS outside the agency because it is configured to operate
on NSA's database and would not be useful to a user outside the
agency.

- 81 -

reported in the press. In statements to William Hamilton and to
investigators of the House Committee, Hayes has made a variety of
allegations about the alleged distribution of Inslaw's enhanced
PROMIS software.

Material Omitted Pursuant to
^ Ped„ Grim., p„ 6{e).

- 82 -

Material Omitted Pursuant to

' Fed- B* Cri m „ 6(e)

The House committee, which has also heard Hayes* accusations
about various subjects related to Inslaw, called Hayes* testimony
"intriguing," but noted that Hayes had failed to provide any
documentation corroborating his charges. The Committee noted that
even William Hamilton regarded as "highly improbable" Hayes' claim

- 83 -

that a local U.S. Attorney's office had sold him surplus word
processing equipment that contained enhanced PROMTS. The
Committee's examination and test of computer disks turned over by
Hayes (and that allegedly contained enhanced PROMTS) established
them to be nothing more than training programs for the word
processing equipment. Hayes' promises to provide information that
would establish that enhanced PROMIS was in use by the Canadian
government were never fulfilled.

Material Omitted Pursuant to
^ Fed* E* Grim* p„ 6(e),

Material Omitted Pursuant to
Fea„ B* .Grim* P. w 6(e).

B. The Claimed Circumstantial Evidence Of A Conspiracy
In addition to the witnesses who claim to have personal
knowledge of Earl Brian's efforts to obtain and distribute PROMTS,
Inslaw has identified a number of witnesses whose testimony, inslaw
officials believe, provides circumstantial evidence of a conspiracy
involving Earl Brian and DOJ officials. An affidavit submitted by
william Hamilton in 1989 in support of Inslaw's Petition for a Writ
of Mandamus succinctly describes various events (and the witnesses
with knowledge of those events) that Inslaw says support its
conspiracy theory. Later, in memoranda submitted to us, Inslaw's
attorneys again summarized the evidence that Inslaw says can be
obtained from these witnesses.

Inslaw's allegations are not readily susceptible to
summarization, but the gist of these allegations is that beginning
at least by 1983, a company controlled by Earl Brian, Hadron, Inc.,
attempted to obtain Inslaw's PROMIS software or control of Inslaw

- 85 -

through a variety of different stratagems. According to Inslaw,
Hadron had ties to DOJ through Earl Brian's supposed influence with
the Reagan administration and prior contacts with DOJ's contracting
officer, Peter Videnieks. Under inslaw’s theory, presumably
because of Brian's political influence. Hadron was able to induce
Lowell Jensen, through various subordinates, to engineer disputes
with Inslaw which eventually drove inslaw into bankruptcy,
inslaw's allegations detail a series of events which, it claims,
establish the plot to obtain its software.

We tried

to

interview virtually

all

of

the

wi tnesses

identified in

Mr.

Hamilton's affidavit

and

in

the

memoranda

submitted by Inslaw's lawyers as supporting these claims. As is
described in detail in the following pages, we found that many of
the witnesses deny making the statements attributed to them by Mr.
Hamilton. In other cases, the individuals confirmed the particular
statements attributed to them, but then admitted that they were
only repeating things that other people had told them, in the end,
we found that much of the supposed "circumstantial evidence"
identified by Inslaw does not in fact exist, and that what does
exist is woefully insufficient to support a finding of a conspiracy
or, indeed, any connection between inslaw and PROMIS on the one
hand, and Hadron or Earl Brian on the other.

The following is a summary of the various alleged, occurrences
that Inslaw believes support its allegation that DOJ officials
conspired to steal PROMIS for the benefit of Hadron:

- 86 -

1 .

The Alleged Call From Dominic Laiti

In his affidavit, Hamilton states as follows:

On April 20, 1983, about two weeks after
[modification 12] and less than a month before
the first sham contract disputes, Hamilton
received a phone call from Dominic Laiti,

Chairman of Hadron. Laiti told [Hamilton] . .

. that Hadron needed the PROMIS software for
federal government contracts that it expected
to receive as a result of its political
contacts . . . [with Edwin Meese] . Laiti said
that Hadron intended to become the leading
vendor in the United states of software for
law enforcement and courts and that this was
why it had recently bought SIMCON Inc (police
software) and ACCUMENICS Inc (litigation

support software) and why it was seeking to
purchase Inslaw (court and prosecution
software) . ... When [Hamilton] declined to

meet with Laiti to discuss his [Laiti 1 s]
proposition, Laiti said, "We have ways of
making you sell."

We interviewed Laiti. Laiti denied making the statements
attributed to him by William Hamilton in Hamilton’s affidavit.
Although Laiti does not recall ever calling Hamilton about Inslaw,
he does not exclude the possibility that he may have called
Hamilton to inquire about the company. He is quite certain,
however, that he never made any threat about having "ways of making
[Hamilton] sell."

2 . The 1983 Laiti Trip To New York
in his affidavit, Hamilton also describes a 1983 Hadron fund-
raising trip to New York, which he claims was made for the purpose
of raising capital to buy PROMIS. specifically, he stated:

Paul Wormeli, former Vice President of
Simeon, Inc., a Hadron subsidiary, and Marilyn
Titus, former secretary at both Simeon and
Hadron, [told] Inslaw [that] . . . Laiti,

Wormeli and Brian met in New York in September

- 87 -

1983 to raise capital for Hadron. wormeli
said that their aim was to raise $7 million
for Hadron's expansion into criminal justice
information systems. Titus, then secretary to
wormeli, added that the purpose of the trip
was to "raise capital to buy the court [i.e.

PROMIS] software." wormeli also stated that
he and Laiti met during this September 1983
visit to New York with Mark Tessleman, then
Vice President of Allen and Company, a wall
Street Investment Bank, to discuss raising the
capital.

We talked to all involved. They did not support Hamilton's
thesis that this was a trip to raise money to buy PROMIS.

a. Earl Brian

Earl Brian denies any knowledge of any efforts by Hadron to
buy Inslaw or to raise capital for that purpose. As described
below, his denials are well corroborated.

b. Dominic Laiti

Laiti stated that he made a business trip to New York City in
late 1983 to raise capital funding for a Hadron subsidiary, Simeon,
which manufactured software products for public safety companies.
Laiti was accompanied on this trip by Paul wormeli, a Simeon
executive. Laiti said that on this trip a presentation was made to
Allen and Company to obtain funding. Mark Kesselman was the Allen
and Company executive with whom Laiti dealt. Kesselman made a
subsequent trip to Simeon in Northern Virginia to review the
company's operations. Laiti stated that the search for capital for
Simeon had nothing to do with acquiring Inslaw or PROMIS.

c. Paul Wormeli

wormeli was the Vice President in charge of Product
Development for Simeon. In 1982, Simeon was purchased by Hadron.

- 88 -

Dominic Laiti was president of Hadron at that time. Wormeli
remained with Simeon for two years after the Hadron purchase,
wormeli essentially confirmed what Laiti told us.

wormeli said that he accompanied Laiti to New York City in an
effort to raise money. Wormeli said that he and Laiti went to the
office of Earl Brian, who was a stockholder and member of the Board
of Directors of Hadron at that time. According to wormeli, it was
apparent from this meeting with Brian that appointments had been
set up with financial people to discuss funding for Simeon.
Wormeli and Laiti then went to the office of Allen and Company
where they met with Mark Kesselman and a young man whose last name
was Allen. After this meeting at Allen and Company, Laiti and
Wormeli also visited other potential sources of funding.

Wormeli said that neither Laiti nor Brian ever discussed with
him the acquisition of PROMIS or Inslaw, and that he does not know
whether the money sought during the 1983 New York trip had anything
to do with Inslaw or PROMIS. Laiti never mentioned PROMIS or
Inslaw to him or at any of the New York meetings.

Wormeli stated that he first became aware of the Inslaw
problems with DOJ from reading newspaper articles. Wormeli knows
William Hamilton from when wormeli worked at the LEAA. He said he
likes Hamilton very much, respects him, and feels bad for him with
respect to Inslaw's problems. While Wormeli is sympathetic to
Hamilton's view of the matter, wormeli told us that he does not
have any knowledge of a connection between Hadron and inslaw.

- 89 -

d. Marilyn Titus

Titus worked for Simeon from September 1982 until January
1984. Her title was Administrative Support Analyst. After leaving
Simeon in January 1984, she worked for Hadron for four years.

Titus told us that to her knowledge the only court -related
software company in which Simeon/Hadron ever had an interest in
purchasing was a Southern California company called Responsive
Design. Titus said that she never heard any discussion at all
about Hadron obtaining PROMIS software, and she does not believe
she ever told William Hamilton that the purpose of the 1983 fund-
raising trip was to raise capital to obtain PROMIS or inslaw. She
also said that she was not present at or a participant in any
conversations that Simeon or Hadron personnel had about inslaw, and
that no one ever made a statement in her presence that indicated
that Wormeli and Laiti attempted to raise capital to buy Inslaw, or
that Hadron had any interest in acquiring inslaw or PROMIS.
Further, she said no one made any statements in her presence that
indicated they were contemplating any unethical or illegal
activities to acquire PROMIS.

e. Mark Kesselman

We interviewed Mark Kesselman, who is employed by Citibank in
Geneva, Switzerland, by telephone. Mr. Kesselman stated that he
was formerly associated with Allen and Company in New York City,
and resigned from that firm in February of 1984. In late 1983,
Kesselman was asked by Charles Allen to assist Allen's nephew,
Nathaniel Kramer, in an analysis of a company in Northern Virginia.

- 90 -

Kesselman did not recall the name of the company, but remembers
that Dominic Laiti, Paul Wormeli and Robert Burke were executives
of this company, and that this company was developing computer
software for police patrol cars. Kesselman spent one day in
Northern Virginia looking over this company. Kesselman does not
recall any additional involvement with this company after that.

As is apparent from our interviews of these people, Hamilton's
affidavit, to the extent it speculates that Laiti traveled to New
York to raise money related to Inslaw or PROMIS, is incorrect. Not
only is there no evidence that Laiti 's 1983 trip to New York had
anything to do with inslaw, there is no evidence from these
individuals that Hadron or Simeon ever had any interest in
obtaining Inslaw's software.

3 . The 53rd Street Ventures Connection
During 1984 Daniel Tessler managed a venture capital fund
called 53rd Street Ventures. In his affidavit, Hamilton claims
that Daniel Tessler is related to Alan Tessler, a partner in a law
firm that represented Hadron, and that Daniel Tessler helped
organize Hadron's efforts to "get" Inslaw:

In December 1984, shortly before INSLAW's
Chapter 11 filing, Daniel Tessler, the

Chairman of 53rd Street ventures, came to
INSLAW and tried to induce [the

Hamiltons] ... to turn over to him the
voting rights of their controlling interest in
INSLAW common, stock. Daniel Tessler told
Hamilton that neither 53rd street Ventures nor
Hambro Venture Capital would attempt to help
INSLAW raise capital and avoid possible
disintegration unless . . . [the Hamiltons]

turned over the voting rights of . . . [their]
stock to him by the end of the business day.

Daniel Tessler is a relative of Alan Tessler,

- 91 -

the senior partner in the New York City law
firm of Shea and Gould responsible for Brian's
and Hadron's mergers and acquisitions work.

At a national venture capital meeting in
Washington D.C., in May 1988, Patricia
Cloherty, Daniel Tessler's wife and former
business partner, told Richard D'Amore, an
officer of Hambro International Fund, that she
"knew all about" Brian's role in the INSLAW
matter.

We could not find . anybody who could confirm any of the
substantive allegations found in this paragraph. To the contrary,
the individuals involved deny these allegations,
a. Daniel Tessler

Daniel Tessler told us that 53rd street Ventures, Inc., was
formed in about 1976 as an investment company. The company took in
capital from its investors /shareholders and invested that capital
in high risk, high reward ventures. The investment company was
originally managed by Patricof and Company Ventures .

In about 1984, Patricof and Company ceased managing 53rd
Street ventures Inc. At that time, Daniel Tessler and his wife,
Patricia Cloherty, through their investment management company,
Tessler & Cloherty, Inc. , assumed management of 53rd street
Ventures, Inc.

At the time Tessler and cloherty took over the management of
53rd Street Ventures, Inc., the investment company had a $100,000
investment in Inslaw, which represented less than 1% of the total
value of the fund's portfolio. This investment had been made in
about 1982, during the time that 53rd street Ventures, Inc., was
under the management of Patricof and Company. Jonathan Ben Cnaan,
who had been an employee of Patricof and Company, arranged for the

- 92 -

investment under the supervision of Patricof & Company. 53rd
Street Ventures' investment in Inslaw resulted in 53rd Street
Ventures’ ownership of about 1.2% of the total ownership of Inslaw.

According to Tessler, he and Cloherty looked into the Inslaw
investment after they assumed management of 53rd Street Venture.
They determined that Inslaw had serious operating difficulties.
They determined, from their inspection of the company and its
records, that Inslaw could not meet its production obligations and
was heavily in debt. At about this same time, Ed Goodman of Hambro
International, another investor in Inslaw, asked Tessler to meet
with William Hamilton to suggest to Hamilton ways that inslaw could
deal with its cash flow difficulties and debt problems.

Tessler met with Hamilton in late 1984 at the Inslaw offices.
Tessler is not sure if there was only one meeting with Hamilton or
others, or if they also spoke by telephone in connection with
Inslaw's financial difficulties. Tessler does recall that during
his discussions with Hamilton, Hamilton asked Tessler about 53rd
Street Ventures investing additional capital in inslaw . Tessler
denied that he ever tried to induce (or even suggested) to Mr. or
Mrs. Hamilton that the Hamiltons turn over to him the voting rights
of their controlling interest in inslaw common stock. According to
Tessler, he did not tell Mr. Hamilton that 53rd Street ventures
(and Hambro) would not help Inslaw raise capital and avoid possible
disintegration unless the Hamiltons turned over the voting rights
of their stock to Tessler by the end of the business day. Tessler
maintained that he never sought control of the Hamilton stock.

- 93 -

Tessler stated that he discussed the issue of control with Hamilton
only in the context of it being an issue with respect to future
investments in Inslaw. According to Tessler, he only told Hamilton
that investors were very unlikely to invest additional capital in
inslaw if the company continued to be managed and controlled by the
same people who were in charge of the company when it got into
financial difficulties. In short, Tessler maintained that he never
sought to gain control of Hamilton's stock and never gave Hamilton
the "ultimatum" described in the Hamilton affidavit.

Tessler told us that he does not know Earl Brian, Edwin Meese,
Dominic Laiti or Lowell Jensen. Tessler told us that he never
discussed- -or communicated in any way- -with Earl Brian, Edwin
Meese, Dominic Laiti, Lowell Jensen or any employee/official of
DOJ, the White House staff or the Reagan/Bush administrations,
about 53rd Street Ventures' investment in Inslaw, Tessler' s
conversations with William Hamilton, or the issue of 53rd Street
Ventures putting additional capital into Inslaw. Tessler assured
us that he has never had any dealing with Hadron, Simeon, or
Biotech, and never discussed 53rd Street Ventures' investment in
INSLAW with anyone from those companies.

As to the claimed connection between Tessler and Earl Brian's
lawyers, Tessler told us that he is not a relative of, and does not
even know, Alan Tessler. Additionally, Tessler has had no dealings
with the law firm of Shea and Gould, and had no discussions with
that firm regarding 53rd Street Ventures' investment in inslaw.

- 94 -

Tessler told us that to his knowledge, his wife, Patricia
Cloherty, has no knowledge of Earl Brian or any connection between
Brian and Inslaw. Further, he said, Cloherty has never told him
that she "knew all about" Brian's role in the inslaw matter, nor
has she ever said words to that effect.

b. Richard D'Amore

Richard D'Amore is a partner in Hambro International Equity
Partners ("Hambro") , Boston, Massachusetts. He stated that Hambro
is a venture capital company in the business of investing in
existing businesses. In 1983, Hambro invested approximately
$400,000 in inslaw. D'Amore was placed on the Board of Directors
of inslaw because Hambro was the lead investor.

We showed D'Amore the statement attributed to him in the
Hamilton affidavit -- namely, that Patricia Cloherty, Daniel
Tessler' s wife and former business partner, had told D'Amore that
she knew "all about" Brian's role in the inslaw matter. D'Amore
told us that Cloherty never made such a statement to him, and that
he never told Hamilton (or anyone else) that she did. D'Amore said
that he does not know of any role played by Brian, or whether
Cloherty knows of any such role.

c. Patricia Cloherty

Patricia Cloherty worked for Patricof and Company in New York
from about 1970 until about 1977, when she was appointed by
President Carter to be Deputy Administrator of the Small Business
Administration ("SBA" ) . When she left the SBA in about 1980, she
worked at Tessler & Cloherty, Inc., an investment management

- 95 -

company that she ran with her husband, Daniel Tessler. In February
of 1988, Cloherty returned to Patricof and company, where she has
been employed ever since.

Cloherty' s description of the history of the 53rd Street
Ventures' investment with inslaw is consistent with what her
husband, Daniel Tessler, told us as described above. She said that
she had no involvement with Inslaw until she and her husband took
over management of 53rd Street Ventures in 1984.

Cloherty said that she knows Earl Brian. She said she met
Brian sometime in the 1980s, when they both served on the board of
the National Association of Small Business Investment Companies.
Cloherty met Brian at board meetings. Cloherty said that in 1990,
Brian contacted Patricof and Company with a deal proposal regarding
UPI . cloherty never met with Brian directly and sent an associate
in the firm to look into the deal. Patricof and Company decided
not to pursue the deal. This was the extent of Cloherty' s contact
with Earl Brian.

Cloherty told us that she has never heard of and has had no
involvement with Hadron or Simeon. She does not know Dominic
Laiti, Edwin Meese, or Lowell Jensen. Cloherty never discussed
53rd Street Ventures' investment in Inslaw with Earl Brian, Lowell
Jensen, Ed Meese, Dominic Laiti, or any officials or employees of
DOJ or of the Reagan or Bush administrations.

While Cloherty knows Richard D'Amore, she insists she never
told Richard D'Amore (or anyone else) that she "knew all about
Brian's role in the Inslaw matter." Indeed, Cloherty maintains

- 96 -

that she does not know anything at all about Earl Brian's
connection, if any, to Inslaw.

4 . The Jonathan Ben Cnaan Allegations

Hamilton's affidavit also referred to a person by the name of
Jonathan Ben Cnaan. According to the affidavit,

Jonathan Ben Cnaan, an account executive
with 53rd Street Ventures, a New York City
venture capital firm that then had a small
equity investment in Inslaw, described a
meeting in September 1983 at 53rd Street
Ventures with a "businessman with ties at the
highest level of the Reagan Administration"
who was eager to obtain the PROMIS software
for use in federal government contract work.

The meeting took place several months after
the contract disputes with DOJ had emerged,
and the businessman assured 53rd Street
Ventures that INSLAW would never be able to
resolve them. According to Ben Cnaan, the
businessman was annoyed that [Hamilton] . . .
had rebuffed an attempt earlier that year to
buy INSLAW in order to obtain title to the
PROMIS software.

Earl Brian denied knowing Ben Cnaan and insisted that he is
not the unidentified businessman who, according to the Hamilton
affidavit, met with Ben Cnaan.

We tried to find Jonathan Ben Cnaan. The number for Ben Cnaan
supplied by Inslaw was disconnected with no forwarding number. We
learned that Ben Cnaan had last been employed by Patricof and
Company Ventures in New York City, and we went to the offices of
that company and met with Office Manager Susan Thomas Smith. Smith
told us that Ben Cnaan formerly worked for Patricof and Company but
had left several years ago to start up a company called Axiom
Capital. Smith believed that Ben Cnaan may have returned to
Israel .

- 97 -

We went to the address of Axiom Capital in New York City but
the company was no longer there and there was no forwarding address
for the company available.

we also asked Daniel Tessler if, as a result of his purchase
of 53rd Street ventures, he could help us in our search for Ben
Cnaan. He told us he had not had contact with Ben Cnaan in years
and, like Smith, told us that Ben Cnaan had started a company
called Axiom some time back. Tessler did not know if the company
was still in business. He also thought that Ben Cnaan had probably
returned to Israel.

Although we would have liked to talk to Ben Cnaan, our
inability to locate him does not preclude us from concluding this
matter. Because it appears that Tessler, D'Amore, and Cloherty did
not say what Hamilton claims they said, even if the attribution to
Ben Cnaan were correct, there would be nothing to tie that claim to
Hadron or Brian, since Brian denies it and Ben Cnaan himself did
not refer to Brian {according to the affidavit) .

5 . The Edward Hurley Overtures

Hamilton's affidavit identified a statement allegedly made by
a Hadron employee named Edward Hurley, in which Hurley supposedly
stated that Hadron "wanted to acquire" PROMIS:

In approximately June 1985, Edward
Hurley, then a Hadron Vice President in charge
of its criminal justice systems work, told
Theresa Bousquin that he did not believe that
INSLAW would be able to survive a Chapter 11
and that Hadron wanted to acquire INSLAW’s
"court software" to complement its law "
enforcement software. Hurley resigned from
Hadron in August 1985, the month after the US
Bankruptcy Court issued a Confidentiality

- 98 -

Order sealing iNSLAW's proprietary and
customer information from DOJ. The
Confidentiality Order thwarted DOJ's covert
efforts to liquidate INSLAW. in the fall of
1985, Hadron divested itself of the law
enforcement software that Hurley had earlier
that year cited as a key part of Hadron's
ambitions in the criminal justice field.

Theresa Bousquin is a current INSLAW employee, having begun
working for inslaw in August 1989. Prior to joining INSLAW,
Bousquin was employed with Fairfax County, Virginia for a number of
years. While employed there, she worked with the implementation
and development of computer programs and systems for the county
courthouses .

Bousquin told us that in 1985 she interviewed for a position
at Hadron. The interview was with Ed Hurley, who was a Hadron Vice
President. During the interview, Bousquin mentioned to Hurley that
she was offered a position at INSLAW. Hurley inquired why she did
not accept this position, and Bousquin responded that she was
concerned because INSLAW was in a Chapter 11 bankruptcy and she was
not sure that INSLAW could survive. Hurley responded that he also
doubted INSLAW could survive this bankruptcy. According to
Bousquin, Hurley told her that INSLAW was the only real vendor for
court systems, both in the product INSLAW had and in the manner in
which INSLAW could respond to differences in the various courts and
prosecutors' offices. She and Hurley agreed that INSLAW had good
technology. Bousquin said that Hurley added words to the effect of
"it would be nice to get one's hands on that software." Bousquin
did not identify any statements Hurley made about any effort by
Hadron to acquire INSLAW. . Instead, she told us that it was her

- 99 -

impression that Hurley was not doing anything active to acquire the
INSLAW software, and that his remark about the software had been
made in passing conversation.

Again, a claim in the Hamilton affidavit about what somebody
said proved inaccurate. Nothing about Bousquin's statement
suggests an effort by Hadron to acquire INSLAW or PROMIS.

6 . The Accumenics Contract Award

In his affidavit, Hamilton states:

A[n] . . . informant who fears reprisal
told Inslaw that James L. Byrnes, a Deputy
Assistant Attorney General in the Land and
Natural Resources Division with close ties to
Meese, spearheaded the award by DOJ in October
1987 to a Hadron subsidiary of a $40 million
computer services contract for litigation
support in that Division.

The award to which Hamilton apparently is referring in this
paragraph is a contract awarded to a company called Accumenics.
Mr. Hamilton and his attorneys refused to disclose to us the
identity of the alleged informant. We then interviewed Mr. Byrnes
in order to determine what role he played in the Accumenics
contract, and what connection he had to Hadron.

James Byrnes, who is currently an Administrative Law Judge
with the Department of the interior, was employed by DOJ during
1986 as an Associate Deputy Attorney General to then Deputy
Attorney General Arnold Bums. In November 1987, Byrnes
transferred to the Land and Natural Resources Division of DOJ.
Byrnes explained that he had transferred to the Land and Natural
Resources Division because he was very interested in environmental
law and wanted to practice in a line division.

- 100 -

Byrnes said that he did not know that he had been named in
Hamilton's affidavit. we then read him the allegations in the
Hamilton affidavit, that Byrnes had "close ties to Meese" and had
"spearheaded the award by DOJ in October 1987 to a Hadron
subsidiary of a $40 million computer services contract for
litigation support in that Division." Byrnes denied any knowledge
of the awarding of such a $40 million computer services contract,
and does not know if such a contract was, in fact, awarded. Byrnes
further stated that he had no knowledge of, or contact with,
Hadron, Simeon, Accumenics or any Hadron subsidiary.

Byrnes told us that he recognized the name Earl Brian, but
said that he had never met him. Byrnes denied that he now has or
ever had "close ties" with former United States Attorney General
Edwin Meese. According to Byrnes, he was interviewed by then
Deputy Assistant Attorney General Arnold Bums and then Attorney
General Edwin Meese when he was initially seeking employment by
DOJ. After joining DOJ, Judge Byrnes was involved in personnel
matters and often attended meetings where then Attorney General
Meese was present. Byrnes described Meese as a friendly
individual, and said that he has used Meese as a reference. Byrnes
does not know, however, if Meese ever has been contacted as a
reference for him. Byrnes told us that he never had any
discussions with Meese about Inslaw or Earl Brian.

7 . The Alleged Vi denieks /Hadron connection

The Hamilton affidavit purports to identify a connection
between DOJ’s Contracting Officer, Peter Videnieks, and Hadron:

- 101 -

John Schoolmeister, a former Customs
Services program officer, told Inslaw that
Videnieks, at the time he was hired as the
PROMIS Contracting officer, was the
Contracting Officer for two contracts between
U.S. Customs Service and Hadron, Inc., and
that videnieks came to know the Hadron
management during the course of that
assignment.

John Schoolmeister told us that during the late 1970s he was
employed by the Department of Customs. He said that he was
employed by the Branch Chief of Engineering services and his main
task was to support the field patrol offices with high technology
equipment.

According to Schoolmeister, Peter videnieks was an employee at
Customs during the time Schoolmeister worked there. Schoolmeister
said that he believed Videnieks to be a "by -the -book" contracting
officer. Schoolmeister did not have a great deal of contact with
videnieks at Customs, but knew him to be a contracting officer with
Customs who later went to DOJ as a contracting officer.

Schoolmeister said that videnieks had some dealings with
Hadron while he was at Customs. According to Schoolmeister, Hadron
had a number of contracts with Customs, but only two were handled
by videnieks. Schoolmeister could not recall which two contracts
Videnieks handled. Although Schoolmeister did not claim to have
any personal knowledge of Videnieks ever meeting any particular
person at Hadron, he said he believed that Dominic Laiti, president
of Hadron, would almost certainly have met Videnieks because Laiti,
according to Schoolmeister, "met everyone in government."

- 102 -

Schoolmeister could not recall any specific significant event
occurring between Hadron and Videnieks.

Videnieks told us that he does not recall being the
contracting officer on any Hadron contract. Neither does Videnieks
ever recall visiting Hadron, or meeting Hadron management.
Videnieks told us that during 1978 to 1981 he worked primarily as
a supervising contracting officer at the Customs Service, and that
it was possible that one of the contracting officers he supervised
administered a Hadron contract.

We attempted to determine whether Videnieks in fact ever
worked on a Hadron contract. Hadron's records show that during the
time Schoolmeister says Videnieks "must have" met Laiti, two Hadron
subsidiaries had contracts with the Customs Service. Videnieks was
not the Contracting Officer on either of these contracts, and his
name does not appear in Hadron's records regarding those contracts.
We determined that Videnieks did supervise the contracting officers
in these two procurements, but Videnieks has no recollection of
these contracts and he is fairly sure that he never traveled to any
vendor location (certainly not to Hadron) with those subordinates.

We did find one connection between Videnieks and a Hadron
subsidiary, but it is extraordinarily tenuous. In December 1980
Hadron purchased a company called Universal Systems, Inc. In 1978
and 1979, prior to Hadron's purchase of Universal Systems,
Videnieks had been the contracting officer on a contract between
the Customs Service and Universal Systems. It is possible that
Schoolmeister may have had this contract in mind. In any event,

- 103 -

the record is quite clear that Videnieks' involvement with
Universal Systems ended prior to Hadron's purchase of that company.

Whether or not videnieks in fact played some role in
connection with a Hadron contract, we are persuaded from our
discussions with him that those contacts were so insignificant that
they have genuinely lapsed from Videnieks' memory. We find no
evidence to support the claim that videnieks' connection with
Hadron {if, indeed, there is any connection at all) was part of a
conspiracy to obtain PROMIS. At most, Schoolmeister 's statement
tends to show that it is possible that Videnieks once met Laiti.
This, both by itself and in conjunction with the other evidence
reflected in this report, falls far short of anything that could
fairly be called evidence of a conspiracy.

8 . The Attempted Purchase of Inslaw By SCT

William Hamilton devoted approximately three pages of his
affidavit to a discussion of a 1986 attempt to purchase Inslaw by
a company called Systems and Computer Technology, Inc. ("SCT"). We
have found so little evidence to support these allegations (and the
inferences that they are supposed to support) that we believe it
unnecessary to repeat these allegations verbatim here. 54 In
general terms, Hamilton describes a "hostile" effort by SCT to
purchase Inslaw in early 1986. He alleges that in "late 1985" DOJ
officials met with SCT representatives "to encourage" the SCT
takeover of Inslaw. Even Hamilton does not allege any direct

54 We note that the House Committee similarly felt no need to
comment on the allegations made by Inslaw about the attempted
purchase by SCT.

- 104 -

evidence of a link between Brian and SCT. instead, he refers to
two events that he apparently believes support the inference that
Brian was behind SCT's efforts to obtain control of inslaw. First,
he says that he has second-hand hearsay information that the
investment firm Allen and Company bought 7.8% of SCT stock on
behalf of an unnamed third party. Second, he says that one of the
law firms that did work for Earl Brian also did work for SCT.

To begin with, we note that it is difficult to understand how
the allegations about SCT would fit into inslaw' s theory of a
Hadron conspiracy. It is undisputed that as of late 1985 inslaw's
implementation contract with DOJ was terminated and that DOJ was
beginning to self -install PROMiS. Moreover, inslaw now claims that
by 1985 Earl Brian had obtained enhanced PROMIS and was selling it
to governments all over the world. Therefore, there would be no
apparent reason for Brian or Hadron to be attempting to control
inslaw (through SCT) in 1986.

More importantly, none of the evidence we found supports the
allegation that DOJ encouraged SCT to buy inslaw, or that Earl
Brian had any connection to the SCT effort. We interviewed the SCT
officers and employees who were primarily involved with the effort
to purchase ins law. They told us that in late 1985 SCT officials
approached Hamilton about a possible purchase of inslaw and that
Hamilton was initially receptive but later rejected the offer.
They also told us that the only contacts between SCT and DOJ
officials occurred when SCT was doing its due diligence in
anticipation of its purchase of ins law. They told us that they

- 105 -

contacted DOJ in order to determine the nature of Inslaw's disputes
with DOJ and the possibility of Inslaw obtaining additional
contract work from DOJ if SCT purchased Inslaw. None of the SCT
employees identified in Hamilton's affidavit had any knowledge of
an effort by DOJ to encourage SCT to purchase inslaw. Likewise,
none had any knowledge of any connection between Earl Brian and
SCT.

9 . The Lois Battistoni Allegations
In his affidavit, William Hamilton attributes the following
information to Lois Battistoni:

Lois Battistoni, a former DOJ Criminal
Division employee, told INSLAW that an
employee of the Criminal Division disclosed to
her in 19 8 8 that the company chosen to take
over INSLAW'S business with DOJ was connected
to one of the top DOJ officials through a
California relationship and that Hadron fit
the bill because both Brian and Meese served
together in Governor Reagan's administration
in California.

. . . Battistoni also learned from

another employee of the Criminal Division in
July 1989 that DOJ intended "to bury INSLAW,"
meaning cover up what it had done to INSLAW.

a. Lois Battistoni

Not surprisingly, we began our investigation of these
allegations with an interview of Ms. Battistoni herself. Lois
Battistoni is a former DOJ administrative employee. It became
apparent during our interview of her that she has absolutely no
first hand information regarding Inslaw's allegations. In fact,
virtually all of the information that she provided came from
newspaper and journal articles that she saved.

- 106 -

With respect to the statement that "an employee of the
Criminal Division disclosed to her in 1988 that the company chosen
to take over Inslaw's business with DOJ was connected to one of the
top DOJ officials through a California relationship and that Hadron
fit the bill because both Brian and Meese served together in
Governor Reagan ' s administration," Ms. Battistoni told us that she
was given this information by an attorney at DOJ who did not wish
to have his identity revealed.

Material Omitted Pursuant to
" Fed*- E„ .Crinu P„ 6(e),

Battistoni did, however, tell us that she was told in 1989 by
Floyd Bankson, who was a system engineer in the Criminal Division,
that DOJ intended to "bury inslaw," meaning cover up what it had
done to inslaw. Additionally, she later told us that Garnett
Taylor and Charles Trombetta had information about DOJ and Inslaw.

While these were the only leads that Battistoni was able to
provide, we must add that, for the following reasons, any
information provided by Battistoni is extremely suspect. To begin
with, Battistoni appeared to manipulate and misstate evidence in

- 107 -

order to support her generalized suspicions of wrongdoing at DOJ.
For example, Battistoni told us that she did not believe that we
were actively investigating the Inslaw matter. We then wrote
Battistoni a letter in which we assured Battistoni that we were
actively investigating the matter, and we would very much like to
meet with anyone who she believed had information that would assist
our investigation. We urged her to contact us to arrange such a
meeting. This letter was sent to the real estate office where
Battistoni worked. Shortly after this letter was sent, a reporter
called to advise that he had been given a copy of our letter and
that this copy of the letter had on the bottom of it "CC:AG/WH."
The letter that we sent Battistoni was not carbon copied to anyone
and had no "CC" reference on it. Battistoni denied altering the
letter and claimed to us she received the letter in that condition.
It appears to us, however, that Battistoni added this "CC"
information in an attempt to suggest that we were sending
information gathered in our investigation to the Attorney General
and the White House (which we, of course, were not) . In an attempt
to undermine the credibility of this investigation, she then gave
this doctored letter to William Hamilton, presumably knowing that
Hamilton would give it to the press.

The second credibility problem was that Battistoni appeared to
be extremely biased against DOJ. During our interview of her, she
accused DOJ of being involved in numerous acts of wrongdoing that
had nothing whatsoever to do with Inslaw. Despite the fact that we
informed Battistoni that the focus of our inquiry was solely on the

- 108 -

Inslaw allegations, Battistoni kept returning to these other
alleged wrongdoings by DOJ. Battistoni' s information about these
other alleged wrongdoings by DOJ- -like her information regarding
inslaw- -consisted purely of hearsay information and speculation.

b . Charles Trombetta

We interviewed Charles Trombetta, one of the individuals who
Battistoni identified as having information about DOJ and Inslaw.
Trombetta stated that he had no direct knowledge of the Inslaw
matter. He further stated that Garnett Taylor might have
information concerning the possession of inslaw documents by the
DOJ security office, but Trombetta could not provide any further
details .

c. Garnett Taylor

Lois Battistoni told us that Garnett Taylor had information
about DOJ and Inslaw. In addition, William Hamilton told us that
a senior U.S. Government official, whom Hamilton refused to
identify, told Hamilton that Taylor, a former security officer at
DOJ, had information about DOJ malfeasance in regard to INSLAW.
Specifically, according to Hamilton's source, Taylor knew about the
destruction of a number of INSLAW documents by the Justice
Department's Office of Security.

j&iaterial Omitted Pursuant to
.Crinu 6(e),

- 109 -

Material Omitted Pursuant to
Fed., R.. Crinu P.. 6(e),

- 110 -

Material Omitted Pursuant to
Fed.. R., Crim. P. 6(e)

d. James walker
Material Omitted *-■

Wpa T? r • "1, ^uant to we spoke with James walker, who is

J,ea * E - Crim. p. 6(e)

the Chief Security Specialist with the Justice Management Division.
Walker has been employed by DOJ for eight years. As part of his
duties he operates a Sensitive Compartment Information Facility
("SCIF"), a specially constructed room with special locks and
alarms within the DOJ building. DOJ attorneys cannot store
classified national security/foreign intelligence documents in
their offices.

Walker supervised Garnett Taylor for approximately one year
before Taylor was transferred to Personnel Security, where Taylor
was assigned for about one year. As a control officer, Taylor had
responsibility for shredding classified documents once a
determination was made that the documents need not be retained.
However, Taylor did not review the classified files of departing
DOJ attorneys to determine whether the documents should be retained
or shredded. Rather, the DOJ attorney would review the classified
documents and determine whether the documents should be shredded or
retained.

Material Omitted Pursuant
Fed., B* Crim.. p.. 6{e)

to

- 111 -

walker stated that it was conceivable that Taylor had been
dispatched to take care of a file cabinet belonging to a DOJ
employee who had left. However, walker had no recollection of an
incident where he reassigned Taylor to another task and handled the
disposition of the documents in the file cabinet himself.

walker stated that there were no Inslaw or PROMIS documents in
the DOJ Security Department. To walker's knowledge there were
never any inslaw documents in any of the safes he controlled or any
of the safes he knew about.

e. Flovd Bank son

We interviewed Floyd Bankson about Battistoni's allegations
that he told Battistoni that DOJ intended to "bury inslaw."
Battistoni was a secretary at LEAA when Bankson worked there in
1977. Bankson later went on to work in the Office of Policy and
Management Analysis within DOJ's Criminal Division. There, Bankson
was involved with the implementation of Project Eagle.

Bankson absolutely denied the allegations made by Battistoni
and Hamilton. He said that he never heard Lowell Jensen say
anything derogatory about Inslaw, and that Jensen had never
pressured him to select the DALITE system for DOJ's case tracking
needs. Bankson also said that he never said that DOJ intended to
"bury INSLAW," and that he in fact was not aware of any wrongdoing
in connection with PROMIS that needed to be "buried." According to
Bankson, Lois Battistoni was "constantly" calling him to ask
whether he had read various news articles. It was Bankson' s

- 112 -

opinion that Battistoni liked the publicity that she had obtained
as a result of Inslaw's allegations.

10 . Ronald LeGrand

In his December 1989 affidavit, William Hamilton swears to the
following:

In late April 1988, Ronald LeGrand, then Chief
Investigator of the Senate Judiciary Committee,
telephoned me to request a full briefing on the
disputes between INSLAW and DOJ. My wife and I
subsequently briefed LeGrand at INSLAW on the
morning of May 11. LeGrand telephoned me two days
later with information that he said a trusted
source had asked him to convey. LeGrand described
the source as a senior career official in DOJ "with
a title" whom LeGrand had known for 15 years and
whose veracity LeGrand could attest to without
reservation. Shortly after DOJ's public
announcement on May 6, 1988 that it would not seek
the appointment of an independent counsel in the
INSLAW matter and that it had cleared Meese of any
wrongdoing, the source told LeGrand that "the
INSLAW case was a lot dirtier for the Department of
justice than Watergate was, both in its breadth and
in its depth." The source also said that the
"Justice Department has been compromised on the
INSLAW case at every level." On several occasions
since then, LeGrand has confirmed what he told me,
and on October 11, 1988, Elliot Richardson, counsel
to INSLAW, sent Robin Ross, an assistant to
Attorney General Dick Thornburgh, a memorandum
summarizing the statements attributed by LeGrand to
his source. In addition, the source made the
following statements:

Jensen engineered INSLAW's problems right
from the start and relied for this purpose
principally upon three senior DOJ officials:

Miles Matthews, Executive Officer of the
Criminal Division; James Knapp, a non-career
Deputy Assistant Attorney General in the
Criminal Division; and James Johnston,
Director of Contract Administration in the
Justice Management Division. Miles Matthews
stated in the presence of LeGrand 's source
that "Lowell [Jensen] wants to get INSLAW out
of the way and give the business to friends."

- 113 -

The source told LeGrand that John Keeney
and Mark Richards, each a career Deputy
Assistant Attorney General in the Criminal
Division, and Philip White, the recently
retired Director of International Affairs for
the Criminal Division, knew "all about" the
Jensen malfeasance in the INSLAW matter.

Although Richards and White were "pretty
upset" about it, the source did not believe
that either of them would disclose what they
knew except in response to a subpoena and
under oath. The source added that he did not
think either Richards or White would commit
perjury.

The source believes that documents
relating to Project Eagle were shredded inside
DOJ but that INSLAW should nevertheless
subpoena DOJ paperwork prepared by a Jensen
subordinate relating to the purchase of large
quantities of computer hardware for which the
senior DOJ career staff could see no
justification.

we contacted LeGrand, who no longer works for the Senate.
LeGrand said he would tell us about his source's information, but
would not disclose his source’s identity.

Material Omitted Pursuant to
Fed., R., Crim., 6(e),

Material Omitted Pursuant to
Fed. R.. Crim. P. 6(e)

- 115 -

Material Omitted Pursuant to
Fed.. R.. Crinu P.. 6(e).

- 116 *

Material Omitted Pursuant to
Fed., R.. Crim., P.. 6(e),

- 117 -

Material Omitted Pursuant to
Fed.. R.. Crim. P. 6(e)

We interviewed Lowell Jensen, who is now a federal district
judge in San Francisco. Judge Jensen denied engineering any
contract disputes with inslaw or directing any DOJ action for the
purpose of hurting Inslaw. Although Judge Jensen believed that he
may once have met Earl Brian in Sacramento, California sometime

Material Omitted Pursuant to
Fed.. R.. .Crim.. P„ 6(e).

- 118 -

during the 1970 's, he denied having any involvement of any nature
whatsoever with Brian during his service with DOJ or thereafter.
Judge Jensen denied having any financial interest in any company
controlled by Brian, including Biotech, Hadron, Accumenics, and
Simeon. He also denied ever owning or ever being promised stock in
any computer -related company.

In a sworn statement to OPR Judge Jensen previously denied any

plot to injure or bankrupt Inslaw and he reiterated that denial to

us. Judge Jensen seemed to us to be sincerely interested in

employing computer technology to modernize DOJ operations and

management. He recalled Project Eagle, a multi -million dollar

project to automate the litigating divisions of DOJ, but denied any

involvement in awarding contracts for the project. {indeed, the

RFP for the project issued in May 1986 and Judge Jensen was

appointed to the bench the following June.) Judge Jensen impressed

us as truthful, sincere, and straightforward in his denials of any

wrongdoing or impropriety in connection with either PROMIS or

Inslaw. as discussed below, none Cher individuals

ferial ^ p . 6 ^

identified by LeGrand’s w stturce who we talked to gave

us any reason to question Judge Jensen's conduct or his
truthfulness.

Miles Matthews, the former Deputy Associate Attorney General,
told us that he never stated or thought that Lowell Jensen wanted
to get Inslaw "out of the way" and give business to friends.
Matthews also told us that he had never heard of procurement
documents regarding Project Eagle (or anything else) being

- 119 -

improperly shredded. Matthews said he has never met or had any
contact with Earl Brian, Hadron, Dominic Laiti, Simeon or
Accumenics.

James Knapp, a former Deputy Assistant Attorney General in the
Criminal Division, told us that he was unaware of any negative
feelings toward Inslaw by Jensen, and denied any knowledge of (or
participation in) a scheme to cause problems for Inslaw and to give
Inslaw's contracts to friends of Jensen or Meese. Knapp also said
that he did not even know Janre^o Johnston (who, according to
LeGrand' s Cr Conspired with Knapp to implement
Jensen's alleged scheme).

James Johnston, the current Director of Contract
Administration for DOJ, likewise told us that he does not believe
he has ever met James Knapp. Johnston told us that he never
discussed inslaw or PROMIS with Lowell Jensen, and that he never
received any directions from any superior at DOJ regarding inslaw .

Our interviews of Phil White, a former Acting Deputy Assistant
Attorney General for the Criminal Division, and John Keeney and
Mark Richard, both current Deputy Assistant Attorney Generals of
the Criminal Division, produced similar results. Each told us that
he had no knowledge of any wrongdoing by Lowell Jensen generally,
or of the type of wrongdoing described in the Hamilton affidavit
specifically.

- 120 -

C. Conclusion Regarding The Alleged Earl Brian Connection

Our investigation has led us to conclude that inslaw's
allegations of a conspiracy to takeover inslaw or to "get PROMIS"
involving Earl Brian and DOJ simply do not withstand any level of
scrutiny. Those individuals claiming to have direct knowledge of
this conspiracy not only are unworthy of belief, but are
contradicted by an abundance of believable and verifiable evidence
to the contrary.

Similarly, the claimed "circumstantial evidence" of such a
conspiracy, as outlined by William Hamilton and Inslaw's lawyers,
falls far short of being proof of anything. Laiti and Brian
convincingly deny ever seeking to obtain PROMIS or Inslaw. Laiti
has denied telling Hamilton that he had ways of making Hamilton
sell. Neither Paul Wormeli, Marilyn Titus nor Mark Kesselman
substantiate inslaw's claim that there was a 1983 trip to New York
for the purpose of raising capital to buy Inslaw or PROMIS.
Richard D'Amore denies telling Hamilton that Tessler's wife and
former business partner, Cloherty, told him that she "knew all
about" Brian's role in the Inslaw matter, and Cloherty denies
making this statement or knowing anything about Brian's alleged
role. Theresa Bousguin, a current Inslaw employee who has no
reason to lie or to say anything that would not help Inslaw, claims
that she told Hamilton about her conversation with Hurley, but her
description of the conversation with Hurley is different from the
one that appears in Hamilton's affidavit, in particular, Bousguin
says that Hurley did not state, and she was not under the

- 121 -

impression that. Hadron was trying to acquire Inslaw or PROMTS.
Additionally, Tessler denies being aware of or participating in any
effort by Earl Brian or others to gain control of Inslaw, and he
denies ever telling Hamilton that 53rd Street Ventures would not
help Inslaw raise capital unless the Hamiltons turned over the
voting rights of their stock to him. Finally, Byrnes denies having
spearheaded, or having any knowledge of, DOJ awarding a $40 million
computer services contract for litigation support to a Hadron
subsidiary. It is possible that all of these people were lying,
but we do not believe that was the case. The substance and the
presentation of their statements persuaded us that these witnesses
were telling the truth.

The information from Lois Battistoni a an«fl 1 tfwl&tttle§ds , ' and the

Material . 6 (e).

information from LeGrand's R« ^rou^ce find absolutely no
corroboration from the witnesses they identified. Indeed, those
witnesses fail to provide any support for a conspiracy of any kind,
and fail to tie any DOJ official to any misconduct with respect to
inslaw or the PROMIS software.

in short, there is no credible evidence that Hadron ever tried
to acquire Inslaw or PROMIS, except for Hamilton’s claim about his
conversation with Dominic Laiti and his claims that Ben Cnaan told
him about a meeting with a businessman with "ties at the highest
level of the Reagan Administration" who was eager to obtain the
PROMIS software for use in federal government contract work. In
light of the fact that virtually none of Hamilton's other
statements in the affidavit are supported by the witnesses we have

- 122 -

spoken to, we are not inclined to rely on Hamilton's
representations as to his conversations with Laiti and Ben Cnaan as
the basis for concluding that Hadron sought to acquire inslaw.

None of the other evidence we found supports Inslaw's
allegation regarding the Brian-DOJ conspiracy. Like the Senate
Subcommittee staff, we find no credible evidence of any connection
between DOJ and Earl Brian or Hadron with regard to Inslaw.

- 123 -

VI. THE ALLEGATION THAT DOJ OBTAINED AN ENHANCED

VERSION OF PROMIS THROUGH FRAUD AND DECEIT

inslaw's original allegations against DOJ were that certain
DOJ employees, because of their intense bias against inslaw,
schemed to "get the goods" from Inslaw; that is, to fraudulently
trick Inslaw into providing DOJ with inslaw's proprietary software.
This is the theory that Bankruptcy Judge Bason adopted in entering
his findings of fact and conclusions of law.

Bankruptcy Judge Bason found that "DOJ converted inslaw' s
enhanced PROMIS by trickery, fraud, and deceit." According to
Judge Bason's view, DOJ used the threat of terminating advance
payments as a "pretense" in order to gain the "leverage" necessary
to obtain an enhanced version of PROMIS. He found further that
when DOJ entered into Modification 12 it "never intended to meet
its commitment" under that agreement, and that once DOJ received
enhanced PROMIS pursuant to Modification 12 it "thereafter refused
to bargain in good faith with inslaw and instead engaged in an
outrageous, deceitful, fraudulent game of 'cat and mouse',
demonstrating contempt for both the law and any principle of fair
dealing. "

The reason for this wrongful conduct, as alleged by Inslaw and
found by Bankruptcy Judge Bason, was Brewer. Judge Bason found
that Brewer was "consumed by hatred for and an intense desire for
revenge against INSLAW." Judge Bason went so far as to find that
the reason Brewer applied for the PROMIS project manager position
was to "use that position to vent his spleen against INSLAW." The
advance payments dispute and the request for the enhanced software

- 124 -

were said to be part of "Brewer's strategy for the ruination of
INSLAW." Judge Bason suggested that Brewer's hatred of Inslaw
poisoned other lower level DOJ employees, and that upper level DOJ
officials consciously ignored Inslaw's complaints about Brewer
because Deputy Attorney General D. Lowell Jensen had a "previously
developed negative attitude about PROMIS and INSLAW."

During our investigation of these allegations we reviewed
deposition and trial testimony, interviewed many of the individuals
involved, reviewed documents produced at trial, and located
additional documentary evidence regarding these matters. The
evidence we have compiled to date does not support a finding that
DOJ employees intentionally deceived or defrauded Inslaw, or that
there was a scheme to trick inslaw into turning over its
proprietary software. To the contrary, we are persuaded that all
of the actions taken by DOJ employees were done with a good faith
belief that they were in the best legitimate interests of the
government. We conclude from our review of the evidence that DOj's
actions in connection with the advance payment dispute and its
request for a copy of the software were reasonable, and not made
for illegitimate or unlawful purposes. Likewise, we do not believe
that the evidence supports the conclusion that DOJ entered into
Modification 12 without any intention of complying with its terms,
and for the purpose of getting Inslaw to "give up the goods."

We do, however, find one area where the judgment of DOJ
personnel might be subject to criticism. After the execution of
Modification 12, and after Inslaw had submitted its proposed

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methodology for identifying privately funded enhancements, DOJ
employees could have made a greater effort to resolve the
proprietary enhancements dispute. The position that DOJ took- -that
its only obligation was to either accept or reject Inslaw's
submissions - -can be criticized as inconsistent with the higher
standard of reasonableness and fair dealing to which DOJ should
hold itself . 61

61 We emphasize that we have not found that Inslaw has
demonstrated any proprietary rights in the software. The
implication in the House Committee Report that DOJ has admitted
Inslaw's superior proprietary rights in the software appears to us
to be entirely unwarranted. The House Report relies upon a
statement of Deputy Attorney General Arnold Burns to OPR, as
essentially an admission that DOJ would lose any litigation to
determine the parties rights in the software. The House Report
cites the statement as "one of the most damaging statements"
discovered by the Committee. Burns' remarks, the Report claims,
establish that Burns was told by "Justice Department attorneys that
the Department would probably lose the case" on the proprietary
rights issue. The Committee's recounting of the statement
completely distorts and misconstrues the context and import of
Burns' statement.

Read fairly and in the context of the entire statement, it is
unambiguously clear that Burns was not saying that DOJ did not have
a valid defense to Inslaw's proprietary rights claims. All that
Burns referred to was the uncontested fact that DOJ could not
successfully counterclaim against Inslaw for Inslaw's use and sale
of the PROMIS software. A counterclaim by DOJ would be
unsuccessful even though that software had originally been
developed at the public's expense, because DOJ had already
acknowledged that the original PROMIS was in the public domain. To
say, as Burns did, that DOJ had no claim against Inslaw for
Inslaw's use of the PROMIS software does not constitute an
admission that DOJ would lose Inslaw's case against DOJ. Bums'
statement did no more than admit the uncontested fact that the
original PROMIS software was in the public domain and that DOJ
would certainly lose any suit in which it took a contrary position.

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A. The Advance Payments Dispute

From what we can discern. Inslaw was the only DOJ contractor
with an advance payments provision in its contract during 1982. in
order to obtain such a provision inslaw had to submit to DOJ an
official request that demonstrated that inslaw qualified for
advance payments under the applicable regulations. Inslaw
submitted that request on February 19, 1982, in the form of a
letter signed by James Kelley, Inslaw's General Counsel. Because
the relevant regulations required that a contractor requesting
advance payments show that no means of adequate financing other
than by advance payments were available to the contractor, Kelley's
February 19 request letter claimed that commercial "borrowing is
not reasonably available as a solution to Inslaw's cash flow
problem." in reliance on that representation, videnieks obtained
specific approval for the advance payments clause of the contract
from the Assistant Attorney General for Administration.

On November 1, 1982, Inslaw notified Videnieks that it had
violated the advance payments clause by assigning its receivables
under the contract as collateral for a line of credit. Videnieks'
immediate response to this notice was far from rash. On November
10, 1982, he sent Inslaw a letter instructing Inslaw immediately to
terminate the event of default (the assignment of its receivables) ,
and requesting Inslaw to provide all documentation concerning the
assignment and the line of credit.

When he received the requested information from Inslaw,
videnieks learned that Inslaw had arranged the line of credit

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secured by the receivables during late March and early April 1982.
Both videnieks and Brewer told us that they were extremely angry to
learn that Inslaw had obtained commercial financing less than two
months after it had declared that financing was not "reasonably
available." Both felt that they had been lied to by Inslaw.

Videnieks told us that it was this misrepresentation by Inslaw
that was the primary reason for his giving notice of termination of
advance payments. Having viewed videnieks demeanor, and having
considered all the surrounding circumstances, we believe videnieks
on this point. Not only did Videnieks feel he had been lied to,
but he also had evidence before him that Inslaw did not in fact
qualify for the advance payment program. virtually everyone we
spoke to, including witnesses identified by inslaw, agreed that
videnieks was a very "by the book" contracting officer, indeed, he
appeared to us to be a man who is most comfortable when discussing
precise contractual issues. His denial that he had any intention
of trying to force Inslaw into "giving up the goods" when he
decided to terminate the advance payments is supported by the
weight of the evidence.

Inslaw, and Bankruptcy Judge Bason, go to great lengths to
emphasize that Inslaw's "technical violation" of assigning its
receivables did not put the government at financial risk. They
appear to be correct on that point. But that does not lead to the
conclusion that DOj’s decision to terminate the advance payments
was wrongful or a pretext, videnieks explained the primary reasons
for the threatened termination in terms of the nature of Inslaw's

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default, not in terms of risk to the government. The fact that the
government was relatively secure did not mean that Inslaw still
qualified for advance payments, or that DOJ had not been misled.
If Inslaw wanted seriously to challenge Videnieks' explanation of
his decision, it would be much more effective to present evidence
that DOJ knew that Inslaw was obtaining commercial financing at the
same time it was representing in its formal request that it could
not. to our knowledge, no such evidence exists.

B. DOJ 1 s Demand For a Copy Of PROMIS

In November 1982 Brewer requested Inslaw to produce "all
computer programs and supporting documentation developed for or
relating to this contract." After Inslaw informed DOJ that the
contract required the contracting officer to make such a request,
Videnieks sent Inslaw a letter on December 6, 1982, requesting in
more specific detail essentially the same materials.

In their prior testimony, and in their statements to us,
Brewer, Videnieks, and Rugh, have maintained that this request was
made out of a concern about Inslaw's financial condition. This
concern arose from the fact that DOJ did not yet have any copies of
the version of PROMIS that was called for in the contract: the
Pilot Project version plus the five BJS enhancements. Because as
of December 1982 DOJ had not yet selected or purchased its mini-
computers, Inslaw had not completed any permanent installations
under the contract. At that point Inslaw was making PROMIS
available to United States Attorneys' offices by way of
telecommunications links to Inslaw's time sharing computer in

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Virginia. DOJ's concern was that if Inslaw failed prior to the
first installation DOJ would not have available to it a functioning
copy of the contract version of PROMIS.

Bankruptcy Judge Bason found that DOJ's claimed concern about
Inslaw's finances were just a pretense and a ruse to "get the
goods" from Ins law. we do not agree, and cannot even find support
for such a theory in the evidence Judge Bason cites.

All of the actions taken by DOJ employees around the time DOJ
made its request for the software are consistent with its
explanation of its conduct. The internal memoranda and the
handwritten notes created around that time by DOJ employees reflect
an ongoing institutional concern about inslaw' s financial health,
and about the "programmatic risk" created by not having a copy of
PROMIS. The testimony of all of the DOJ witnesses points to
continuous discussions within DOJ about Inslaw's financial health
and about how DOJ would and could respond in the event of a
failure. To believe that DOJ's concerns about Inslaw's financial
health were actually a pretext, would require a finding that
certain DOJ employees were so prescient that they created numerous
internal documents, and indeed even misled their superiors, just so
that they could defend themselves against a claim of theft years
later .

At trial, Bankruptcy Judge Bason refused to believe any of the
DOJ witnesses who expressed concerns about Inslaw's financial
viability. He found that during the winter of 1982-83 Inslaw was
not in a vulnerable financial position, and therefore concluded

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that DO J 1 s claimed concern about ins law's financial condition was
a "known false pretext," put forward as part of a scheme to obtain
a version of PROMIS to which the government was not entitled. 62

Videnieks testified at trial that he had been told by Robert
Whitely, the government's auditor on the inslaw contract, that
inslaw was near insolvency. Whitely likewise testified that after
reviewing inslaw's financial statements and meeting with Inslaw's
accountants, he expressed his view that Inslaw either was or was
nearly insolvent.

Bankruptcy Judge Bason, however, said he believed Whitely' s
testimony was "manufactured solely for use at trial." (Oddly,
elsewhere in his findings and conclusions, Bankruptcy Judge Bason
found that Whitley was "generally truthful.") Judge Bason stated
this conclusion after finding that Whitely never prepared any
report, that Whitely never referred to the potential of Inslaw's
insolvency in his deposition, and that Videnieks did not mention
Whitely in his deposition. All of these factual assertions appear

“Bankruptcy Judge Bason neither acknowledged nor addressed the
inherent tension between his finding: (a) that in December 1982,
when DOJ requested a copy of the contract version of PROMIS,
Inslaw's financial position was so strong that any claimed concern
by DOJ employees must have been pretextual, and (b) that in January
1983 (one month later) , when DOJ threatened to terminate the
advance payments, DOJ employees were "well aware of ins law's
financial position and were equally well aware of the potential for
harm to Inslaw from delayed payments" . ironically, one item of
evidence Judge Bason cited as evidence of Inslaw's strength was its
$1.2 million line of credit at Bank of Bethesda. Obviously, Judge
Bason felt that the willingness of a bank to lend to Inslaw was a
sign of financial health. He never addressed, however, what it
said about Inslaw's financial health that in order to get a loan
Inslaw was required to pledge assets it had agreed not to assign,
and that Inslaw had apparently borrowed more than it had planned to
borrow at the tinle of the contract award.

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to be just plain wrong. Even in the pages of trial testimony that
Judge Bason cites as support for the proposition that Whitely never
documented his concerns, Whitely testified that he did in fact
prepare work papers that he submitted to Justice Management
Division officials. Likewise, Whitely stated quite clearly in his
deposition, "I thought Inslaw, unless they became a more profitable
corporation, was facing insolvency, period." Finally, Videnieks
stated in both his deposition and his trial testimony that he was
informed by the "audit staff" of the potential for an Inslaw
failure. Whitely, of course, was part of the audit staff.

Not only did the evidence support DOJ's claim that its
employees were subjectively concerned about Inslaw's financial
health, but also independent evidence suggests that those concerns
were not unreasonable. One of Inslaw's investors, a former member
of its Board of Directors, told us that by the Spring of 1983,
shortly after he made his initial investment in inslaw, he had
decided not to invest further in the company because he felt it did
not have a strong future. Another investor expressed a similar
view of the company based on his analysis of Inslaw's condition in
1984 .

In summary, we find that DOJ requested a copy of PROMIS not as
a pretext, but out of a good faith belief that the possibility of
an Inslaw failure left the government in an extremely vulnerable
position.

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C. DQJ * s Original Demand was Not For Enhanced PROMIS

There is a fundamental, and perhaps fatal, flaw to the theory
of conversion advanced by Inslaw and Bankruptcy Judge Bason.
According to that theory, DOJ asked for a copy of PROMIS and then
used "the pretense of threatened termination of advance payments"
as part of a plan whereby DOJ "knowingly set out to obtain a
version of PROMIS to which it was not entitled under the contract
and which DOJ understood contained proprietary enhancements
belonging to Inslaw." As is apparent from Judge Bason’s
formulation of the plan, this theory requires proof that DOJ set
out to obtain something to which it was not entitled. That proof
is missing.

The contract required Inslaw to provide only public domain

software; i . e. , the Pilot Project version plus the five BJS

enhancements. DOJ's initial request was for the software being

provided under the contract. If Inslaw had in fact maintained a

contract version of PROMIS there would have been no proprietary

rights dispute. Inslaw's production of such a version would have

satisfied any obligation it had under the contract, and DOJ would

have been protected from an Inslaw failure.

\

Inslaw did not maintain such a version, however, and therefore
it faced the possibility of producing a version of PROMIS that it
considered proprietary. It was as a result of this situation that
inslaw notified DOJ in February 1983 that the time -sharing version
of PROMIS contained proprietary enhancements. But the fact remains
that there is no evidence that anyone at DOJ knew before February

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1983 that inslaw was unable to produce a contract version of
PROMIS . 63

The absence of such evidence is critical. Throughout his
opinion Bankruptcy Judge Bason refers to DOJ's attempts to "obtain
a version of PROMIS to which it was not entitled." But Brewer,
Videnieks and the others at DOJ could not have been trying to get
a version of PROMIS to which they were not entitled unless they
knew that Inslaw was unable to produce the version of PROMIS to
which they were entitled. 61 We have scoured the record trying to
find evidence that Inslaw told DOJ that it did not maintain a copy
of the contract version of PROMIS, but we find nothing. In fact,
we cannot even find evidence that anyone at DOJ knew that Inslaw
was providing something other than the contract version of PROMIS
through time -sharing. 66

63 lns law's statement in its technical proposal that it would
"make available" to DOJ privately financed enhancements during the
life of the contract does not constitute such evidence. To begin
with, it is a far different thing to say "enhancements will be made
available" than to say "enhancements were unilaterally inserted in
your program and the old version was discarded." Moreover, any
claim by Inslaw that its technical proposal allowed it to put
proprietary enhancements in the contract version of PROMIS is
completely inconsistent with Inslaw's conduct. If Inslaw had
believed that the contract permitted it to provide DOJ with
software in which the government had only limited rights, the whole
Modification 12 dispute would not have arisen the way it did. The
problems arose when, faced with a request for a copy of software
being used to perform the contract, Inslaw declined to produce the
software requested because it recognized that the government had
unlimited rights in the contract version of PROMIS.

61 Inslaw does not dispute that DOJ was entitled under the
contract to have Inslaw produce some version of PROMIS.

65 Videnieks specifically asked Inslaw in his March 8, 1983,
letter to identify any government personnel to whom notice was

(continued. . . )

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Bankruptcy Judge Bason found that DOJ's request for the
software, by its very nature, " required Inslaw to produce software
codes for the enhancements otherwise not deliverable under the
contract." (emphasis added). This is not the case. DOJ's initial
request required Inslaw to produce the version of PROMIS it was
using to perform the contract. It was the failure of Inslaw to
maintain an "unenhanced" version of the software that "required" it
to produce an enhanced version in response to the government's
request. The evidence is quite clear that the decision to maintain
only one version of PROMIS was made by Inslaw alone, without
consultation with or request from DOJ. The testimony of Inslaw's
witnesses at trial, as well as internal Inslaw documents from that
period, makes clear that the allegedly proprietary enhancements
were "incorporated into the Executive Office of the U.S. Attorney's
VAX version of PROMIS . . . [in order] to simplify maintenance of
VAX/ PROMIS i.e., to maintain a single version of most of the
computer programs for EOUSA and for Inslaw's other VAX clients.''
Indeed, one of inslaw' s officers testified at trial that it was
"inevitable” that inslaw would produce the claimed proprietary
enhancements to DOJ because inslaw didn't have another version of
PROMIS that was frozen and bug free.

It is this absence of evidence that DOJ knew, when it
requested a copy of the PROMIS codes, that it would obtain

65 ( . . . continued)

given prior to February 4, 1983, that Inslaw was using a

proprietary version of PROMIS to perform the contract. Inslaw
never identified anyone in response to this request.

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something other than the contract version, that is one of the great
weaknesses in Bankruptcy Judge Bason's conversion theory. This,
along with the other evidence described above, leads us to conclude
that DO J ' s demand for a copy of the PROMIS codes was made in good
faith and for legitimate reasons.

d. DOJ's Conduct After Modification 12

By the time the parties executed Modification 12 the situation
was different, however. At that point Inslaw had informed DOJ : (1)
that the VAX version of PROMIS being provided under the time
sharing arrangement contained enhancements that Inslaw considered
proprietary, and (2) that Inslaw could and would remove these
enhancements if DOJ wanted, but that backing out the enhancements
would be a difficult and costly process. It was in response to
these representations by Inslaw that DOJ presented in its March 18
letter the proposed solution that resulted in Modification 12. 66
Under DOJ's proposal Inslaw first was "to identify the 'proprietary
enhancements' that it [could] demonstrate were developed at private
expense and ... outside the scope of Inslaw’s performance of any
government contract.” DOJ would then either direct Inslaw to
remove the enhancement or negotiate with inslaw regarding inclusion
of the enhancement. Pending resolution of the inclusion/removal
issues, DOJ could not disseminate the software beyond the offices
covered by the contract.

“Although Modification 12 itself does not mention the dispute
resolution procedure outlined in the March 18 letter, we think it
clear, and most at DOJ do not dispute, that DOJ was obligated to
live up to its proposal of March 18.

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In agreeing to this dispute resolution process DOJ was
bargaining away some of its rights. Prior to Modification 12, DOJ
could claim unlimited rights in any software provided to it by
Inslaw. if Inslaw had voluntarily provided more software than
required, it appears to us that the data rights clause, in
conjunction with the voluntary efforts provisions of the contract,
would have given DOJ unlimited rights in the software produced.
Under Modification 12, however, the government in effect agreed to
"give back" any enhancements it did not want by instructing Inslaw
to delete those enhancements from doj's copy of the software.

Bankruptcy Judge Bason found that DOJ "never intended to meet
its commitment" under Modification 12. We do not believe the
evidence supports that finding. The weight of the evidence
demonstrates that the DOJ employees involved reviewed Inslaw's
submissions in good faith, and responded in ways that they
subjectively believed were within the government's legitimate
rights under the contract. We find no evidence of bad faith or
intentional wrongdoing.

On May 4, 1983, Inslaw proposed to DOJ a specific methodology
for identifying proprietary enhancements. Under this proposed
methodology, for each claimed enhancement Inslaw would identify the
date of the change and the programmer (s) responsible for that
change. inslaw would then review the time sheets of the
programmer (s) for the relevant period to determine if the
programmer (s) had billed sufficient time to non -government projects
so that the change could fairly be described as privately funded.

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Inslaw told DOJ that in pursuing this methodology, it would be
required to retrieve and review thousands of pages of historical
documents, inslaw asked DOJ to confirm at the outset that this was
an acceptable method. In its letter, inslaw also asked DOJ to
suggest revisions to the methodology if this approach was
unacceptable.

Videnieks relied primarily on Jack Rugh in responding to this
proposal. Rugh considered the proposed methodology inadequate.
Rugh told us that his strongest objection was to the part of the
proposal that would count privately funded hours first. 67 He felt
the issue was not whether a programmer billed "sufficient” time to
have billed a change to a private client, but whether the
programmer billed the "actual" hours in which the change was made
to a private client. Rugh also told us that he believed from
inslaw’s submissions that Inslaw did not keep sufficient records to
prove that the changes were privately funded.

Rugh considered whether to propose to Inslaw an acceptable
methodology. In the end, Videnieks and Rugh chose neither to
accept Inslaw’s methodology nor to propose revisions or an
acceptable methodology. Neither Videnieks nor Rugh informed Inslaw
why its methodology was unacceptable, or that Rugh had concluded
that sufficient records did not exist to support any methodology.

67 in other words, if a programmer billed 20 private hours and
20 government hours in a week in which it took him 19 hours to make
a particular change, Rugh understood that the proposal would count
that change as pr-ivately funded.

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This is not a response we would have recommended. It is
difficult for us to see a good reason not to tell Inslaw what
criticism DOJ had of inslaw' s methodology. Perhaps Inslaw could
have addressed those concerns. Perhaps not. But the point is that
it was in neither party's interest to have Inslaw guessing about
what was the problem with the methodology. We think that instead
of simply signalling "thumbs down" without further explanation, it
would have been preferable for DOJ to have articulated its reasons
for rejecting Inslaw's proposal.

But the question for our investigation was not whether DOJ
employees behaved as we would have, but rather whether there is
sufficient evidence to conclude that these employees responded in
bad faith with the intent wrongfully to obtain Inslaw's property or
injure Inslaw. We found no such evidence. Videnieks and Rugh felt
that their position was proper because, as they read Modification
12, they only had an obligation to negotiate about whether to
include enhancements once they were demonstrated, not to negotiate
about whether the enhancements existed, in addition, Rugh did not
propose an alternative methodology because he believed that Inslaw
had insufficient records to support any reasonable methodology. He
told us that he in fact considered proposing an alternative
methodology as a theoretical matter, but that after he became aware
of the type of records inslaw kept he was unable to devise any
acceptable methodology. We are persuaded from our meetings with
Rugh and videnieks and from our review of the evidence that these
reasons, and not a desire to cheat Inslaw, explain DOJ's conduct.

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While we may have responded differently, we do not divine from
the conduct of DOJ's employees here some conspiracy or intent on
anyone's part to cheat Inslaw. In our judgment, this conduct
stemmed from a desire to protect the legitimate interests of the
government. We believe, however, that the judgment exercised by
DOJ in this instance failed to respond to Inslaw's legitimate
request and failed to aid resolution of the issues about the
alleged enhancements. We attribute this conduct mostly to the
atmosphere of distrust that surrounded the administration of this
contract. Within months after the start of the contract. Brewer
and other DOJ employees had come to question Inslaw's credibility
on key issues (and they can point to specific instances in which
Inslaw made what they felt were inaccurate statements) . Likewise,
within a couple of months after the start of the contract, Hamilton
and other Inslaw employees came to question Brewer's objectivity
(and they, too, can point to episodes from which they concluded
that Brewer was overtly hostile) . In short, there may have been
poor judgment here, but not intentional wrongdoing.

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VII. THE ALLEGATION THAT DOJ WRONGFULLY DISTRIBUTED PROMTS

in addition to claiming that Earl Brian and Hadron illegally
obtained and distributed PROMIS, Inslaw has alleged that DOJ itself
wrongfully distributed PROMIS. These allegations focus on three
separate areas: (1) the claimed use of PROMIS by the FBI in

creating its FOIMS computer program, (2) the installation of PROMIS
in U.S. Attorneys' offices beyond the 20 sites at which Inslaw
installed PROMIS, and (3) the claimed distribution of enhanced
PROMIS to various foreign governments. We will address these in
turn.

A. A Comparison of FOIMS and PROMIS

1 . The Allegation that FOIMS is Pirated From PROMIS

inslaw first raised the prospect that the FBI's Field Office

information Management System ("FOIMS") was a pirated form of

Inslaw's PROMIS software in papers filed with the Bankruptcy Court

in early 1991 in support of its motion to reopen discovery. To

support this charge. Inslaw relied upon a January 1991 letter from

Terry D. Miller, President of Government Sales Consultants, Inc.,

to FBI Director william Sessions. Miller's letter charged:

I Have [ sic ] reason to believe that the
software that your agency uses throughout the
U.S. -FOIMS- is stolen.

Miller's letter stated no basis for his belief that FOIMS was
stolen, but urged the Director to investigate.

The FBI did just that. In response to Miller's letter, Kier
T. Boyd, the Deputy Assistant Director of the FBI's Technical
Services Division, wrote Miller asking for the basis of his charge.

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including the individual or company from whom the software was
stolen, a description of the software, who stole the software and
when. Miller's reply to the FBI's letter was to charge that the
FBI's response was "defensive." Miller did not provide any of the
information the FBI requested.

Miller's letter and the FBI's response promptly found their

way to inslaw and were attached to Inslaw's brief in the Bankruptcy

Court. Inslaw' s submission essentially charged that, by not

rejecting Miller's charge out of hand, the FBI admitted that FOIMS

was stolen and that FOIMS was PROMIS. In a subsequent affidavit

filed with the Bankruptcy Court, the FBI's Boyd provided the denial

that Inslaw claimed was missing. In his affidavit Boyd stated:

. . . since learning of Inslaw's assertion

respecting PROMIS, I have reviewed the matter
with the FBI staff responsible for the
development of FOIMS from September 1977 to
the present. On the basis of that review, I
can state that a) the FBI does not use, nor
has it ever used, the enhanced version (or any
other version) of PROMIS and that b) FOIMS was
developed entirely by the FBI in-house; it is
not based on and does not contain the enhanced
version (or any other version) of PROMIS -- or
any portion thereof.

In subsequent correspondence with the FBI, Miller stated that
he did not know whether FOIMS contained stolen software and
acknowledged that he based his allegations on claims made by
others. Inslaw, however, disagreed. In a submission to us, Inslaw
claimed that an unnamed "senior career Justice Department official"
told Inslaw that John Otto, former Acting Director of the FBI, had
admitted that FOIMS was PROMIS.

- 142 -

The House Committee Report repeated some of the allegations
that had been made by Inslaw about FOIMS, but did not purport to
answer Inslaw's questions. The Report noted, however, some of the
preliminary steps we had taken during our investigation to resolve
the issue.

2 . Our Investigation

Early in our investigation of inslaw's allegations, we talked
to Otto about the admission Inslaw claimed he made. Otto denied
making the statement that FOIMS is PROMIS. Otto told us that he is
essentially "computer illiterate" and he had insufficient technical
knowledge even to discuss such a subject . 68

Nevertheless, because of the importance inslaw attached to
this issue, we hired an expert consultant to settle the issue
whether FOIMS was derived from PROMIS. Director Sessions offered
us the FBI's complete cooperation and agreed with our request to

v

conduct an examination of the FOIMS software. The Director
requested several reasonable security related conditions, including
requiring that our expert have appropriate security clearance, we
agreed with the conditions proposed by the Director.

We asked inslaw to provide us suggestions on the selection of
an expert and specifically indicated our desire to retain a person
with no previous contact with the PROMIS controversy. Mr. Hamilton
directed us to Marian Holton, an Inslaw employee. Holton, after

6B lnslaw also suggested to us that the Drug Enforcement Agency
(DEA) also used PROMIS. We spoke with Philip Cammera, from DEA
Information Systems, who told us that DEA used neither promis nor
FOIMS. Instead, DEA used a third case tracking management system
that DEA had developed internally.

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first advising us that she would need to study our request, finally
advised us that the only expert that she could recommend was the
expert that Xnslaw had used in the adversary proceeding against the
DOJ. we again explained that we wished to retain an independent
expert who had not previously formed opinions about the PROMIS
dispute. Holton later indicated that she could suggest no one
other than Xnslaw 1 s prior litigation consultant. In August 1992,
Inslaw did provide us with a proposed plan for the analysis of
FOIMS .

Despite the absence of any helpful suggestions about an expert
from Inslaw, we retained Professor Dorothy Denning, Chair of the
Computer Science Department at Georgetown University. Professor
Denning had served as a expert for the defendant in a criminal
matter tried before me in the Northern District of Illinois. The
successful defense in that case resulted in the mid- trial dismissal
of the charges. The FBI voiced no objection to our choice and
processed her security clearance.

We believe Professor Denning's impartiality cannot reasonably
be questioned. Professor Denning's credentials are impeccable.
We provided a copy of her curriculum vitae to Inslaw for comment
and received no objections. We also provided the professor with a
copy of Inslaw's FOIMS analysis plan to facilitate her comparison
of FOIMS and PROMIS.

We attempted to reach William Hamilton on three separate
occasions to invite him or another Inslaw representative to the on-
site review of FOIMS at the FBI headquarters. Our calls were not

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returned. We specifically informed Hamilton’s office that we would
be at FBI headquarters on January 8, 199 3, to review the FOIMS
software. We left a message asking Hamilton to telephone us so
that we would know the identity of the Inslaw representative who
would accompany us during the review. Again, our calls were not
returned. After the close of business on January 7, 1993, the day
before our review, however, Hamilton sent a facsimile transmission
of a letter to the U.S. Attorney's Office in Chicago.

in his lengthy letter, Hamilton reiterated his belief that
FOIMS had been derived from PROMIS. He informed us, however, that
Inslaw did not wish to participate in our comparison of FOIMS and
PROMIS, and speculated that the FOIMS software might have been
switched by the FBI during the course of our investigation.
Hamilton's letter also repeated his request for the appointment of
independent counsel and suggested that the new administration
appoint one. Hamilton also suggested that a "last minute"
examination, i . e . , one prior to the appointment of a new Attorney
General, would inhibit his ability to discover the truth. We
proceeded with our investigation without participation by Inslaw.

Before Professor Denning's review, we spoke with Gordon
Zacrep. zacrep has been Section Chief of the FBI's System
Development Section since 1985. He denied that FOIMS had any
relation to PROMIS. Zacrep told us that the FBI had independently
developed FOIMS and that the FBI had never received a copy of the
PROMIS software. Zacrep offered whatever assistance he and the FBI
could provide to facilitate our review of the software. He offered

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to make available all programmers and support staff we needed to
assist us and any information that we wished to review.

We asked Professor Denning to do whatever she believed was
necessary to evaluate the claim that FOIMS was derived from PROMIS.
Professor Denning viewed both the operation of FOIMS at the FBI
Headquarters and the operation of PROMIS at DOJ. After Professor
Denning's review of the two programs, she told us that there could
be no relation between the two programs. She was extremely
confident of her conclusion. She said that the PROMIS software,
which is written in COBOL, is so different from FOIMS that it could
not have served as the platform for the development of FOIMS, which
was written in the NATURAL /AD ABASE programming/database management
environment. Professor Denning concluded that the two programs
were so obviously different that any further examination of the
source code would be a waste of her time and the government's
money .

We have complete confidence in the opinions and conclusions of
Professor Denning, we also credit the representations of Zacrep
concerning the origins of the FOIMS software. We conclude that the
FBI's FOIMS software is not PROMIS or any derivative of PROMIS. It
is unfortunate Inslaw declined to participate in the review of the
operation of the two software systems, we are confident that after
seeing the operation of the software, any reasonable person would
readily agree that FOIMS and PROMIS are completely different.

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B . DOJ's Self - installation of PROMIS

After the expiration of the 19 82 contract DOJ began self-
ins tailing PROMIS in additional U.S. Attorneys' offices. The
version of PROMIS that DOJ used to make these installations was the
Prime version of PROMIS that Inslaw had installed at the 20 large
offices listed in the contract. Inslaw now claims, and Bankruptcy
Judge Bason found, that these additional installations violated
Modification 12, which limited dissemination of PROMIS "to the 94
United States Attorneys' Offices covered by the contract." Inslaw
says that Modification 12' s reference to 94 offices should be
understood to mean that DOJ could install PROMIS only at the 20
offices designated to receive PROMIS under the contract, and that
as to the other 74 offices DOJ could install only word processing
software. DOJ, on the other hand, takes the position that
Modification 12 had nothing to do with the word processing
software, and that it only agreed to limit dissemination of PROMIS
beyond the various U.S. Attorneys' offices. After reviewing the
entire record, we agree with DOJ, and find that it was neither
improper nor unreasonable for DOJ to self -install PROMIS after the
expiration of the contract.

To begin with, all of the various correspondence and documents
surrounding the execution of Modification 12 refer exclusively to
PROMIS computer software. DOJ's original request was for PROMIS,
and Modification 12 itself recited that its purpose was "to effect
delivery to the Government of VAX -Specific PROMIS computer programs
and documentation requested by the Government on December 6,

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It

1982. ..." Similarly, the dissemination restriction contained
within Modification 12 specifically said that the "Government shall
limit and restrict the dissemination of the said PROMIS computer
software. . . . " These specific references to PROMIS cannot
reasonably be viewed as intending to cover word processing based
programs as well. Throughout the contract, the statement of work,
and Inslaw's technical proposal, a distinction was always made
between PROMIS and the word processing based software that would
perform PROMIS -like case management functions. When the parties
wanted to refer to word processing software in addition to PROMIS
they knew how to do it. There is no reference to the word
processing software in Modification 12 or in the government's
request for a copy of the contract version of PROMIS. 69 Indeed,
at least one Inslaw employee admitted at trial that nothing in
Modification 12 requested word processing based software.

Consistent with such a request, Inslaw delivered to DOJ only
PROMIS computer software on April 20, 1983, when it complied with
its obligations under Modification 12. Although inslaw did deliver
word processing software to DOJ from time to time, this was done
both before and after Modification 12, and never with reference to
Modification 12.

DOJ's interpretation is also far more consistent with the
positions taken by the parties prior to the execution of

69 As part of its Modification 12 request the government asked
for computer programs developed for extracting data from word
processing based systems. Such programs are separate from the word
processing based systems themselves, and are necessary only to
transfer data to the computer based system.

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Modification 12. In negotiating Modification 12, Inslaw wanted to
limit dissemination in order to protect property in which it
claimed a proprietary interest. Yet Inslaw has never claimed any
proprietary interest in the word processing software. Any
reference to word processing software in connection with
Modification 12 would have been unnecessary and superfluous.
Likewise, Inslaw's position from the start, even as explained to
its own lawyers, was that it would give enhanced PROMIS to DOJ at
no extra cost if DOJ would agree "not to disseminate the U . S .
Attorneys' Office version [of PROMIS] beyond the U.S. Attorneys'
Offices, currently numbering 94." (emphasis added)

Bankruptcy Judge Bason's finding that Modification 12 limited
dissemination of PROMIS computer based software to the 20 offices
at which Inslaw installed PROMIS ignores the essential nature of
the contract. The 1982 contract was an implementation contract.
It called for the contractor to install (and tailor) a public
domain version of PROMIS in 20 offices. Although inslaw was only
obligated to install the contract version of PROMIS at 20 cites,
nothing in the contract purported to limit DOJ's right to self*
install that public domain software at additional offices.

Bankruptcy Judge Bason suggested that a reading of
Modification 12 "in the context of" the original contract leads to
the conclusion that DOJ agreed to limit dissemination to the 20
designated offices. This makes little sense. The original
contract called for Inslaw to implement a version of PROMIS with
which DOJ could do anything, including self -install at other sites.

-149 -

Nothing about this "context" suggests that in negotiating
Modification 12 DOJ intended to give up its right to fully automate
all U.S. Attorneys' offices with PROMIS if it so chose. Rather,
against this background a much more reasonable interpretation of
Modification 12 is that it operated to eliminate DOJ's right to
disseminate PROMIS outside of U.S. Attorneys' offices, but not its
right to self -install PROMIS within the jurisdiction of the EOUSA.

Accordingly, we believe that DOJ's self - ins tallation of PROMIS
did not violate Modification 12.

C. The Alleged International Distribution of PROMIS by DOJ

inslaw and others have made various allegations about the
international distribution of PROMIS that are independent of the
allegations about Earl Brian and Hadron. They allege that DOJ
distributed a proprietary version of PROMIS to various foreign
governments around the world for use in intelligence and law
enforcement operations. We have found no evidence to support these
claims .

DOJ personnel (and internal memoranda) tell us that only
public domain versions of PROMIS (Old PROMIS and the Pilot Project
version) have been distributed. There is one documented
international distribution. In May 1983 DOJ responded to a request
from an Israeli official by giving him a copy of Old PROMIS. The
House Committee found that "it was uncertain" what version DOJ
actually turned over. Although we do not know what evidence the
House Committee had before it when it made this statement, it
appears to us that every available piece of evidence indicates that

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it was the LEAA version. Indeed, the allegation that there was
something sinister about the distribution to Israel leaves
unanswered the question of why DOJ would go to all the trouble of
documenting the fact that it was giving a copy of PROMIS to Israel
if this was some sort of covert operation. As far as we can tell,
the allegation that DOJ distributed enhanced PROMIS internationally
is pure speculation, for which there is absolutely no evidentiary
support . 70

Admittedly, our investigation of the claimed international
distribution of PROMIS by DOJ has not proceeded past the
preliminary stages. We do not believe that it needs to.
Theoretically, we could continue our investigation of this subject
by contacting various foreign governments, asking them to provide
us with the source code to their law enforcement software, and then
hiring an expert to compare that software to PROMIS. We do not
think this is a prudent course to take for a number of reasons, not
the least of which is the failure of Inslaw's other allegations of
excessive distribution and criminal conspiracies to withstand
scrutiny. Given the enormity of undertaking a full scale

70 The House Committee also investigated allegations that the
Canadian Government was using PROMIS. According to the Committee
Report, all of the Canadian government officials with whom
Committee investigators spoke told them that the Canadian
government was not using PROMIS or PROMIS derivatives. The Report
indicates that the Committee was unsatisfied with the degree of
cooperation provided by the Canadian government, and therefore felt
that it was "thwarted in its attempts to support or reject the
contention" that the Canadian government was using PROMIS. The
Report identifies no reason why the Committee would believe that
the Canadian officials with whom they spoke were less than
truthful.

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international investigation of these allegations, we feel that it
would be an irresponsible use of the taxpayers' money to initiate
this type of international fishing expedition where there is so
little reason to believe that we would find evidence of a crime or
other wrongdoing by the government.

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VIII. THE ALLEGATION THAT DOJ OBSTRUCTED THE
REAPPOINTMENT OF BANKRUPTCY JUDGE BASON

Three months after announcing his ruling on liability in
Inslaw's adversary proceeding, Bankruptcy Judge Bason was informed
that he would not be reappointed as the bankruptcy judge for the
District of Columbia. The Merit Selection Panel {the "Panel") that
reviewed the candidates for the position had recommended another
attorney as its top choice for the job. The D.C. Circuit's
Judicial Council essentially agreed with that recommendation, and
the Court of Appeals, which made the actual selection, adopted that
choice. Almost immediately, Bason suggested that DOJ must have
improperly influenced the selection process in retaliation for his
ruling in Inslaw .

We reviewed documents and interviewed numerous people who were
involved in this matter, including those attorneys with DOJ who
have been suspected of having obstructed Bason's reappointment. We
found no evidence that anyone tried to influence the selection
process inproper ly . 71 Indeed, we found evidence of only one
relevant communication between anyone associated with DOJ and

71 As part of our investigation, we reviewed certain records of
the Merit selection Panel and of the u.s. Court of Appeals for the
D.C. Circuit. Those records were made available to us only upon
our promise that they would not be disclosed beyond the Office of
the Attorney General without the permission of the Chief Judge of
the U.S. Court of Appeals for the D.C. Circuit. Those records
largely confirmed information that we had already obtained from
other sources, without a pledge of confidentiality. There was
little new information. None of the new information- -such as the
precise vote of the Court of Appeals or the comments of individual
judges- -affected our analysis. Accordingly, we have avoided
reporting any information which would require the permission of the
Chief Judge prior to disclosure of that information beyond the
Office of the Attorney General.

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anyone involved in the selection process. Specifically, the then
Chief of the Civil Division for the U.S. Attorney's Office for the
District of Columbia, who had been nominated and was awaiting
confirmation for the District Court, provided to the chair of the
Panel a copy of Judge Bason's oral ruling on liability in the
Inslaw case . 72

The deliberations of the Panel and the Court are confidential.
Nevertheless, we were provided access to confidential documents of
the Panel and Court, and we interviewed members of the Panel.
Although it was not part of our task to discover why Bankruptcy
Judge Bason was not reappointed, we learned enough to reach
conclusions on that subject. For example, we learned that
opposition to Bason's reappointment was not limited to the Chief of
the Civil Division of the U.S. Attorney's Office for the District
of Columbia. The Panel also heard from bankruptcy practitioners,
including a former bankruptcy judge, who opposed Bason's
reappointment for reasons wholly unrelated to Inslaw . Indeed, two
members of the Panel advised us that the Inslaw ruling did not
influence the Panel unfavorably toward Bason. In short, there is
every indication that the decision was not influenced significantly
by either DOJ or the ruling in ins law .

72 Judge Bason did not issue his written opinion until after the
Court of Appeals decided not to reappoint him.

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A. The Selection Process

1 . The Vacancy

On February 8, 1984, George Francis Bason, Jr., was appointed
to fill the vacancy created by the resignation of the District of
Columbia's only bankruptcy judge, Roger Whelan. Shortly after that
appointment. Congress passed the Bankruptcy Amendments and Federal
Judgeship Act of 1984. That Act established the expiration of
Judge Bason's term as four years after his appointment -- that is,
February 8, 1988. The Act also authorized the Judicial Conference
of the United states to prescribe regulations for the selection of
bankruptcy judges.

2 . The Merit Selection Panel

In March 1985, the Judicial Conference promulgated regulations
that permitted the judicial councils of each circuit to establish
a merit selection panel to submit to the Judicial Council the names
of the best qualified candidates, and for the Judicial Council to
submit the names of the three best candidates to the Court of
Appeals .

The first opportunity for the federal judges in the District
of Columbia to use this procedure was in 1987 -- prior to the
expiration of Judge Bason's term. Judge Bason sought reappointment
even before adoption of the selection process. He did so in May
1987 by letter to Chief Judge Patricia Wald of the united States
Court of Appeals for the D.C. Circuit. In June 1987, the Circuit
Executive sent the Chief Judges of the District Court and the Court

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of Appeals a memorandum proposing a selection process consistent
with the regulations prescribed by the Judicial Conference.

Following these procedures, Chief Judge Aubrey Robinson of the
district court recommended four persons for membership in the Merit
Selection Panel ("Panel"). Chief Judge Wald invited all four
persons to serve on the panel, and each accepted the invitation.
They were District Judge Norma H. Johnson, Dean Jerome A. Barron,
Wesley Williams, Jr., and Thomas C. Papson. The letters of
invitation were sent to the prospective panelists during the first
week, of August 1987, just as testimony in the Inslaw case before
Judge Bason was concluding. There has been no suggestion that the
concurrence of these events was due to anything other than pure
coincidence.

3 . The Panel's Consideration of the Inslaw Ruling

Thereafter, the Panel solicited applications, interviewed the
candidates and contacted references. Judge Norma Johnson, who
chaired the Panel, also solicited her colleagues' views of Judge
Bason. It was during this process that Judge Bason ruled orally
that DOJ had stolen and converted Inslaw's software. His written
opinion came later. Judge Johnson had previously read about the
case in the newspaper, but she had no genuine understanding of the
Bankruptcy Court's role in the case until Bankruptcy Judge Bason's
oral ruling of September 28, 1987, was brought to her attention.

Judge Johnson initially recalled to us that it was one of the
district judges who recommended that she obtain a copy of the
transcript of Judge Bason's oral ruling in Inslaw . Because

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information presented to the Panel was viewed as confidential,
Judge Johnson initially declined to disclose the judge who directed
her to the Ins law ruling without first consulting that person.
Upon contacting the judge who she believed provided the
information, she discovered that she had been mistaken. It was not
that judge who directed her to Bason's ruling; it was District
Court Judge Royce Lambreth.

a. AUSA reported Inslaw ruling to Civil Division
Chief

Judge Royce Lambreth was confirmed for the United States
District Court for the District of Columbia on November 13, 1987.
On the date of Judge Bason's oral ruling, September 28, 1987,
Lambreth was still the Chief of the Civil Division for the U.S.
Attorney's Office for the District of Columbia.

The U.S. Attorney's Office for the District of Columbia
maintained a file on the inslaw case, but no one in that office
performed any substantive work on the case. The file was opened
because, by statute. Inslaw’s complaint against DOJ had to be
served on that office. Patricia Froman, the Assistant U.S.
Attorney who handled nearly all bankruptcy cases that were filed in
the District of Columbia in which the United States was a creditor,
was assigned the file when the complaint was received. Attorneys
from DOJ immediately notified Froman that they would handle the
case. They did so. This is not an unusual arrangement for
complicated cases or, for that matter, for any case in which DOJ
has prior involvement. DOJ assumed full responsibility for the

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case, and the U.S. Attorney's Office assumed none. In fact, no one
in the U.S. Attorney's Office followed the case formally.

USAO Civil Chief Lambreth periodically spoke to Stuart
Schiffer, the Deputy Assistant Attorney General of DOJ's Civil
Division, about various cases. Inslaw was mentioned only in
passing. Although he cannot recall any specific discussion of
Inslaw, Schiffer advised us he almost certainly revealed his
displeasure with Bason to Lambreth by joking that Lambreth' s office
should assume responsibility for the problematic case. schiffer
never encouraged Lambreth to speak to the Merit Selection Panel
about Judge Bason. Nor did Lambreth indicate that he had or was
going to speak to the Panel. The subject simply never arose . 73

Ultimately, Lambreth did communicate with a Panel member, but
this communication was not prompted by anything Schiffer said.
Rather, Lambreth' s contact with the Chair of the Panel resulted

73 Schif f er ' s knowledge of Judge Bason was limited to that
derived from his experience with the Inslaw case. Schiffer
believed that persons with greater experience with Bason would be
better suited than he to assess Bason’s qualifications for the
bench. He assumed (indeed, hoped) that if the Inslaw case was not
an isolated incident, some person or persons who were knowledgeable
about Bason would oppose Bason's reappointment. Schiffer advised us
that he did not know Lambreth would complain about Bason and that
he did not complain to Lambreth about Bason in the hope that
Lambreth would address the Panel. Cynics may point to this
communication between Lambreth and Schiffer as evidence that the
Department secretly canpaigned to retaliate against Bason because
of his rulings in Inslaw . We found no evidence of any such
campaign. We also note that it is entirely appropriate for a
Deputy Assistant Attorney General of the Department of Justice to
discuss with a Civil Chief of a United States Attorney's Office
cases that are pending in that Chief's district. Such discussions
should be open and candid and might properly include criticisms of
particular rulings.

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from the special interest that one of the Assistants in Lambreth's
Division had in the Inslaw case.

That Assistant was Patricia Goodrich Carter. She had preceded
C. Madison Brewer as project manager at EOUSA for the
implementation of PROMIS. She had no contact with the project
after Brewer replaced her until inslaw filed its complaint against
DOJ. After the complaint was filed, one of the attorneys from DOJ
questioned her to determine whether her testimony might be useful
at trial. When it was determined that Carter would not be a
witness at trial, she was advised that she was free to observe the
trial. She attended the opening statements and heard at least
William Hamilton's testimony. She was also present for Judge
Bason's oral ruling on liability.

Carter regarded Bason's ruling as truly unbelievable. She had
heard Hamilton's testimony regarding Brewer's departure from the
Institute, which sounded to her like a fairly amicable separation.
She was amazed therefore at Judge Bason's conclusion that Brewer's
conduct toward Inslaw resulted from personal animosity for having
been fired. She was similarly amazed at the conclusion that DOJ
stole inslaw' s software by trickery and fraud.

Carter recalled that after hearing the oral ruling, she bumped
into Royce Lambreth in a common area of their office. She told him
about the ruling and expressed her amazement. He invited her to his
office to describe the ruling in greater detail. Carter assumed
that Lambreth's interest in the matter arose solely from his being
Chief of the Civil Division and having a concern as a government

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attorney about a decision from their district that harshly
criticized the government.

Thereafter, Lambreth received a copy of the transcript of the
ruling. How and when he obtained the transcript are uncertain, for
no one recalls precisely who obtained a copy of the ruling for the
U.S. Attorney's Office. 74 Nevertheless, there is no question that
one was obtained. Carter still has a copy. Pat Froman, who
handled most bankruptcy cases in the District of Columbia for the
government, also had a copy in her files prior to her retirement.

b. Royce Lambreth reported Inslaw ruling to Judge
Johnson

Lambreth either delivered a copy of the transcript of Bason’s
ruling to Judge Norma Johnson or suggested that she obtain a
copy. 75 Although Lambreth did not comment on the ruling, it was
clear to Judge Johnson from his tone or his words that he viewed
the ruling as reflecting unfavorably on Judge Bason.

74 Copies of the printed transcript of the opinion were
delivered to Inslaw's attorney, DOJ's attorney and the Clerk of the
Bankruptcy Court on the day following the ruling, that is,
September 29, 1987. Lambreth recalled that he asked Pat Froman,
the Assistant in that office who handled most bankruptcy cases in
the District of Columbia for the government, to obtain the opinion.
Froman recalled telling Lambreth, at his invitation, her
unfavorable opinion of Judge Bason, but she has no recollection of
being asked to obtain or of obtaining the Ins law ruling.

75 Lambreth cannot now recall whether he delivered the
transcript or merely referred Judge Johnson to it. Judge Johnson
initially recalled that a young man from the Circuit Executive's
office who assisted her obtained a copy after another judge
suggested she obtain it. After contacting Judge Lambreth at our
request, Judge Johnson recalled that he handed her a copy of the
transcript and said something to the effect of "You ought to see
this . ’’

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Lambreth brought Bason's ruling to Judge Johnson's attention
because he wanted to avoid "blindsiding" the other judges on the
committee that he imagined would vote on Judge Bason's
reappointment. 76 More specifically, Lambreth correctly assumed
that he would be confirmed and sworn in to the District Court prior
to the selection of a bankruptcy judge for the district. He
erroneously believed, however, that he would have a role in the
selection process. Being unfamiliar with the new rules for the
selection of bankruptcy judges, Lambreth believed that the District
Judges would make that selection. He wanted Judge Johnson to be
aware of Bason's ruling in Ins law so she and the other District
Court judges would not be surprised when he joined the court and
made known his opposition to Bason's reappointment.

Lambreth' s opposition to Bason’s reappointment was not based
exclusively on his reading of the Inslaw ruling. Lambreth also
solicited the views of AUSA Patricia Froman who had worked in the
U.S. Attorney's Office for many years and had appeared before many

76 Judge Lambreth is not certain whether he directed Judge
Johnson's attention to the Inslaw ruling before or after he became
a judge. Although the fact has relatively minor significance for
our purposes, we conclude that the event occurred while he was
still with the U.S. Attorney's Office but shortly before he became
a judge. Judge Johnson knows that she obtained and read the Inslaw
ruling before Veterans' Day of 1987 because that is the day that
the Panel held a hearing regarding Judge Bason. Judge Johnson had
invited attorney Charles Work to appear at the hearing upon reading
in Bason's oral ruling that Work represented Inslaw. Prior to
reading Bason's oral ruling. Judge Johnson did not realize that
Work, whom she knew previously as an Assistant U.S. Attorney, did
any bankruptcy work. Because Judge Lambreth was not sworn in until
November 16, 1987, it appears to us that he must have directed
Judge Johnson's attention to Bason's ruling prior to his assuming
the bench.

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bankruptcy judges, including regular appearances before Judge
Bason. Froman described Bason to Lambreth as courteous and likable
but often unfair. She described Bason's tendency, in her opinion,
to "bend over backwards" to favor debtors. According to Froman,
she cited an egregious example and noted that Bason often allowed
debtors "one more chance" after they had already been given many
chances to comply with prior orders. Froman told Lambreth that the
government would be better off if Bason were not reappointed.

Lambreth did not discuss with either Froman or Carter the fact
that he spoke with Judge Johnson. Indeed, both of them assumed
that information regarding Judge Bason was of interest to Lambreth
solely in his capacity as Chief of the Civil Division in the
district in which Bason presided. Lambreth himself regarded his
conversation with Judge Johnson as a confidential judge- to- judge
communication on a matter in which they both had, or soon would
have, an interest as judges.

c. The Panel considered the Inslaw ruling

After obtaining a copy of Judge Bason's oral ruling in inslaw .
Judge Johnson circulated copies to the Panel members. It was the
only judicial opinion that was circulated. Although Judge Johnson
presented the opinion without commentary, at least one Panel member
perceived that the opinion was presented, not because it revealed
great wisdom or scholarship, but because it reflected unfavorably
on Judge Bason’s suitability for the bench.

According to three Panel members, the Panel discussed Bason's
ruling at one of its meetings and found nothing untoward about it.

- 162 -

It appeared to the Panel to be simply one judge's opinion on a
fact - specif ic matter about which the Panel did not know the facts.
One Panel member said he derived little information about Bason
from the opinion other than the fact that Bason was not timid. The
Panel members agreed that the Inslaw opinion should not influence
their evaluation of Judge Bason . 77

We reviewed the materials of the Panel that have been
maintained by the Circuit Executive. Those materials include notes
of the Panel and of the Judicial Council. There is no indication
that the Inslaw ruling played any role in the process.

d. Our Conclusions Regarding Lambreth' s
Communication With judge Johnson

Assuming {contrary to the information we received) that the
Inslaw ruling did influence the Panel's evaluation, we find nothing
untoward in the fact that Royce Lambreth brought that ruling to the
attention of Judge Johnson, who circulated it to the other Panel
members. Lambreth had an interest in the matter which was
different than that of most bankruptcy practitioners. He was soon
to be a member of the District Court that presided over Judge
Bason. He had every reason to try to influence the selection
process to select a bankruptcy judge in whom he had confidence.

Lambreth told us that he was motivated to speak with Judge
Johnson exclusively because of his expectation that he would soon

77 This statement is contradicted somewhat by the statement of
Attorney Charles Work, who advised us that Judge Johnson asked that
he speak to the Panel about Inslaw because Judge Bason's
reappointment was "in trouble." Work assumed that the "trouble"
resulted from the inslaw ruling.

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preside on the District Court. We do not doubt his statement.
Indeed, he apparently told no one in his office of his plans or of
his communication with Judge Johnson, although he may have
discussed Bason with other soon- to-be fellow judges.

Regardless of Lambreth's motivation, he nonetheless was a
government attorney at the time he spoke with Judge Johnson. Thus,
we have considered whether it is proper for a government attorney
privately to approach the Chair of a Merit Selection Panel to
express his views. We conclude that such an approach is proper,
and Lambreth's approach of Judge Johnson was proper even if he did
so solely as a government attorney interested in opposing the
appointment of a judge whom he regarded as unfair to the
government . 18

There is no legal or ethical obligation that prohibits an
attorney from communicating his or her views or those of a client
to a panel that is considering the appointment, reappointment or
advancement of a judge about whom that attorney has information,
whether positive or negative. Indeed, that is the way the merit
selection system is supposed to work. All interested parties are
encouraged to express their opinions, and the panel weighs those
opinions and the source of those opinions and determines
independently which candidate is best for the position. Obviously,
a Merit Selection Panel cannot create a complete profile of a

7B Whether DOJ itself may properly take a position in favor of
or opposed to a particular judicial candidate is a different
question as to which we express no opinion.

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candidate if an entire class of interested persons self -censors its
criticism.

Insofar as Lambreth may be criticized for using his
circumstance as a soon-to-be judicial officer to influence the
Panel, we think the criticism is unfounded. As Chief of the Civil
Division for the U.S. Attorney's Office in Bason's district,
Lambreth was in a unique position to collect information regarding
Judge Bason. He should not have been precluded from communicating
that information to Judge Johnson simply because he expected soon
to be her colleague. Indeed, as we have noted, that expectation
gave him all the more reason to express his views. Additionally,
Lambreth apparently collected information about Bason to satisfy
himself that the Inslaw ruling was not an isolated incident. Yet,
he communicated no information to Johnson other than the Inslaw
ruling and a tone of voice that allowed Judge Johnson to surmise
Lambreth’ s negative view of Bason's ruling. His conduct bespeaks
restraint, not a campaign to unseat Bason in retaliation for the
inslaw ruling.

Finally, no one we interviewed described Judge Johnson as
anything less than fiercely independent, a view that she shares.
To the degree that Royce Lambreth attempted to influence Judge
Johnson in his capacity as either an Executive Branch employee or
a prospective judicial officer, the effort had little effect,
according to Judge Johnson. She considered the Ins law ruling along
with all the other information the Panel received. She obviously
was not greatly influenced by the fact that the ruling came to her

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from Lambreth. When we first spoke to her, she did not even recall
that it was Lambreth who gave her the opinion. 79

4 . Opposition to Bason From Outside DOJ

Royce Lambreth was not the only person who communicated
opposition to Judge Bason to the Panel. The Panel also solicited
views from attorneys who practiced before Judge Bason. (For the
other candidates, the Panel solicited comments from references,
supervisors and opposing counsel, as is discussed below) . One
lawyer who commented negatively about Judge Bason to the Panel was
Roger Whelan, the bankruptcy judge who preceded Bason. Whelan, a
practicing bankruptcy attorney, reportedly had received complaints
about Bason from several of his colleagues. According to Whelan,
these attorneys shared his view that Bason was pro -debtor and too
slow in making decisions. Whelan reported these views to the Panel
by telephone.

Whether there is any truth to the charge that Judge Bason did
not administer his docket efficiently is not especially relevant to
our investigation. What is relevant is the perception that Judge
Bason was a poor administrator. This perception, accurate or not,
was made known to the Panel at least by former Judge Whelan and

79 When Judge Johnson spoke to the Senate Subcommittee, she
apparently also did not recall that the transcript came from
Lambreth or she did not recall that Lambreth was a member of DOJ
when he gave her the ruling. According to a memorandum authored by
the Assistant Counsel of the Senate Subcommittee, Judge Johnson
told the Subcommittee that she had no contacts with DOJ regarding
Judge Bason and she received no negative input from DOJ regarding
the Inslaw case. So far as we can tell from the House Report, she
told that Committee the same thing. The Senate and the House
Reports both found no evidence that anyone from DOJ had attempted
to influence the selection process.

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almost certainly by others. One Panel member who had not spoken to
Whelan and was not aware of Whelan's views acknowledged to us that
the Panel was concerned about Judge Bason's administrative
abilities .

We do not know the extent to which this perception influenced
the Panel’s ultimate recommendation. As previously indicated,
under the procedures adopted by the U.S. Court of Appeals for the
District of Columbia Circuit, the Panel's deliberations are
confidential, and Panel members have declined to discuss their
deliberations with us. The perception that Judge Bason was a poor
administrator, however, almost certainly influenced the Panel's
process . After soliciting views informally, the Panel invited
bankruptcy practitioners to appear before it to address the Panel
more formally regarding Judge Bason's qualifications. Such a
proceeding would not likely have been suggested if the informal
comments about Judge Bason had been uniformly positive.

Sixteen lawyers accepted the Panel's invitation. One of them
was Charles Work, an attorney for Inslaw, who appeared after being
assured that DOJ had been afforded the same opportunity. DOJ
declined to appear at the hearing in view of the pendency of the

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Inslaw case. 80 The hearing was held on November 11, 19 87, and
lasted several hours.

One member of the Panel characterized the attorneys' comments
about Judge Bason as predictably "guarded." 81 At least two of the
attorneys at the hearing, however, reportedly did speak against
Judge Bason.

We do not know what impact, if any, this proceeding had on the
Panel's recommendation. It is clear, however, that there was
opposition to Judge Bason's reappointment, some of which was voiced
at the hearing. None of that opposition was voiced by DOJ, because
DOJ had declined to participate in the hearing.

Obviously, the fact that DOJ did not participate in the formal
selection process does not eliminate the possibility that DOJ waged
a whispering campaign against Judge Bason. It would be odd,
however, if DOJ had foregone an opportunity to fully express its

80 ln retrospect, this appears to us to have been a prudent
decision. Apparently, DOJ's unwillingness to communicate its views
about Bason to the Panel arose from a combination of practical and
ethical considerations. Included among the practical
considerations was the fear that an unflattering review might
somehow be revealed to the Bankruptcy Judge and he would extract
vengeance in his written opinion in Ins law . The DOJ attorneys who
were involved in the Inslaw case told us that they expected that
Bason would be reappointed regardless of their views.

81 Despite the Panel's pledge of confidentiality to the
participants at the hearing, nothing more should have been
expected. After all, attorneys who regularly practice in the
federal courthouse were being asked to comment to a sitting
district court judge and three attorneys, who may have been
complete strangers, about the qualifications of the incumbent
bankruptcy judge. At that point in the process, there was no
certainty that Bankruptcy Judge Bason would not be reappointed and
there was a good possibility that the very attorneys who spoke
against him would be appearing before him in the near future.

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views of Judge Bason in an ex parte proceeding with a pledge of
confidentiality, in favor of a covert mission to unseat him. We
found no evidence of any such covert effort by DOJ.

5 . The Other Possible Opposition Effort

We do not mean to suggest that former Bankruptcy Judge Roger
Whelan single-handedly derailed Bankruptcy Judge Bason's
reappointment. Based on our discussions with Panel members, he
could not have done so. Indeed, if Whelan alone had raised
concerns about Bankruptcy Judge Bason's administrative ability and
all other respondents had praised his performance, the Panel would
not likely have held a hearing to address the subject.

Whelan's opposition to Judge Bason's reappointment is
significant, however, for yet another reason. One witness alleged
that Whelan threatened a concerted effort by persons outside DOJ to
prevent Bankruptcy Judge Bason from being reappointed.
Specifically, Charles Docter, an attorney for inslaw, reported to
the House Committee on the Judiciary that in July 19 87, Whelan had
threatened to oppose Bason's reappointment because Bason had not
ruled on a fee petition filed by Whelan. 82 Docter reportedly
informed the House Committee that Whelan came to his office in
July, 1987, and complained about Bason's delay in ruling on a fee
application filed by him in the UPI case. Whelan allegedly told

S2 A summary of Docter' s statement to the House Committee was
included in a draft chronology of events relating to the failure to
reappoint Judge Bason. We obtained this unsigned document from a
counsel to the Senate Subcommittee, who apparently obtained it from
someone on the House Committee. Both Docter and Whelan confirmed
that they testified in private before the House Committee.

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Docter that Senior District Court Judge Irwin Gasch would organize
the opposition to Bason's reappointment.

Docter told Bankruptcy Judge Bason about his conversation with
Whelan and recommended that Bason act promptly on Whelan's fee
application. Bason ruled on Whelan's fee application on July 17,
1987. Docter referred us to his testimony before the House
Committee, but refused to provide us any additional information.

Whelan reportedly testified before the House Committee and
spoke to us. He acknowledged that he represented a party in the
UPI case and that he had been frustrated by Judge Bason’s delay in
ruling on an application he had filed in the case. He stated that
the pleading was an application for compensation for his client and
not an application for attorney's fees. He also acknowledged that
he is a friend of Senior Judge Gasch. He denied, however, that he
ever spoke with Charles Docter about the UPI case or that he ever
tried indirectly to put pressure on Judge Bason to rule on his
application for compensation in that case.

We have not attempted to resolve this seeming disagreement
between the statements of Doctor and Whelan. 83 For example, we
have not interviewed Judge Gasch, requested Docter 's and Whelan's
records for the relevant period, or asked Bason about the alleged
nudge from Docter. This conflict bears only tangentially on
whether DOJ improperly influenced or attempted to influence the
selection process for the District of Columbia bankruptcy

“without copies of the statements Doctor and Whelan gave to
the House Committee, it is impossible to definitely conclude that
there was a conflict in testimony.

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judgeship. Nevertheless, the possibility of concerted opposition
to Bason by district court judges or others might explain why he
was not reappointed.

6 . The Panel 1 s Recommendation

Of the twelve candidates who applied for the position, the
Panel concluded that six of them were worthy of further
consideration. Bason was one of those six. The six finalists were
invited for a second round of interviews by the Panel, after which
the Panel voted on their choices. S. Martin Teel, Jr., an attorney
in the Tax Division of DOJ, received the most votes.

On or about November 24, 1987, the Panel submitted to the
Judicial Council a list of four names in order of preference. The
list included Judge Bason. S. Martin Teel, Jr. was listed first.

7 . The Judicial Council's Recommendation

The Judicial Council then consisted of the twelve active
judges on the Court of Appeals and six judges of the District
Court. On December 15, 1987, the Judicial Council considered the
report of the Merit Selection Panel and, after approximately one
and one -half hours of discussion, voted to recommend the first
three names on the panel's list to the Court of Appeals for its
consideration. Teel and Bason were included on the Judicial
Council's list of three names.

Tangentially, Bason reported to us that Chief Judge Aubrey
Robinson and another judge whom he refused to identify later
reported to him that most of the district court judges on the
Judicial Council were "not in sympathy" with the Panel's

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recommendation. Judge Bason was advised that some of the judges
wanted to remand the matter to the Panel for reconsideration, we
did not question Chief Judge Robinson or any other judge about
these representations, as they are not relevant to the allegation
that DOJ obstructed or attempted to obstruct Bason's reappointment.
Moreover, if the judges were in fact unhappy initially with the
Panel’s recommendations, they obviously were satisfied with the
recommendations by the end of the meeting, for the Judicial Council
voted without apparent dissent to essentially adopt the Panel’s
recommendations .

8 . The Selection By the Court of Appeals

Each of the three finalists was interviewed by seven judges of
the Court of Appeals. Some of the judges also contacted individual
members of the Merit Selection Panel for details about their
recommendations, on December 21, 1987, the judges of the Court of
Appeals voted either in person or by telephone on the selection of
the bankruptcy judge. Judge Teel won by a substantial majority.

9 . The Confidential Memorandum

During the House Committee's investigation of the non-
reappointment of Judge Bason, one of the judges who was interviewed
provided the Committee with a "confidential memorandum" dated
December 8, 1987. We obtained a copy of this memorandum through
the Circuit Executive. The memorandum describes each of the four
finalists for the position of bankruptcy judge. Each description
except that for Judge Bason begins with positive commentary. Judge
Bason is described as "inclined to make mountains out of

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molehills," "having a reputation for favoring debtors," and failing
to take control of the poorly managed Bankruptcy Court Clerk’s
Office. The memo also bears the direction, "Please read and
destroy." Obviously, every copy was not destroyed.

The House Report states that several members of the Panel were
shown the memorandum, which was unsigned, but did not recognize it.
The Report also states, seemingly inconsistently, that a member of
the Panel identified the author of the memorandum as another member
of the Panel. That person denied having written the memo.

All four of the Panel members with whom we spoke stated that
they were not familiar with the memo. Indeed, they did not recall
even having been shown the memo by a House Committee investigator.
One member of the Panel said that the memo sounded like a
compilation of four of the summaries that were written by each of
the Panel members about the candidates he or she was assigned to
investigate. The memo's description of Judge Bason was consistent
in general with this member's memory of the Panel's conclusions
about Judge Bason.

The House Report states that the memo apparently was given to
several judges on the Court of Appeals after Judge Bason asked the
Court to reconsider its decision not to reappoint him. Although
the memo may have been circulated after Bason complained, it seems
likely that it was prepared in anticipation of the Judicial
Council's meeting. The Panel issued its report to the Judicial
Council on November 28, 1987. The confidential memo is dated
December 8, 1987. The Judicial Council met to discuss the Panel's

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recommendations on December 15, 1987. in light of these dates and
the memo's statement that "its purpose is to 'help' elucidate in
particular our reasoning in ranking the candidates as we did, " we
assume that the memo was prepared for and provided to the Judicial
Council or, at least, certain members of that Council.

Without knowing the author of the memo, we cannot reach many
conclusions about it. For example, we do not know whose views are
reflected in the memo, although the text of the memo suggests that
it is intended to reflect only an individual Panel member's views.
Nevertheless, even assuming that the memo did influence the
selection process, it is difficult to imagine how the influence was
improper or how DOJ played a role in the matter. There is no
indication that someone from DOJ either prepared or planted the
memo. The views expressed in the memo do not contain any criticism
of Bankruptcy Judge Bason’s rulings in. the Inslaw matter.

The House committee commented particularly on the criticism of
Bason in the confidential memo in contrast to the description of
the other candidates. This circumstance, however, does not strike
us as unusual. For the Panel to have recommended against an
incumbent bankruptcy judge in favor of a government lawyer with
less bankruptcy experience and no judicial experience, it must have
had some reason for doing so. No one has suggested that the
Panel's recommendation was the result of personal vengeance or a
mere desire to bring a fresh face into the federal courthouse.
Accordingly, it should come as no surprise that the Panel, or at
least one of its members, found reasons to criticize Bason. Again,

-174 -

we reach no conclusions about the validity of any of these
criticisms, we note only that the Panel’s apparent perception that
Judge Bason was an inefficient administrator was not totally
baseless, and, more importantly, was not attributable to a DOJ
campaign against Bason. The Panel had heard that criticism at
least from former Bankruptcy Judge Whelan who reported his own
evaluation of Bason and those of other bankruptcy practitioners whp
reportedly had communicated their views to him.

B. The Initial Allegation

On December 28, 1987, Chief Judge Wald informed Judge Bason of
the Court's decision. On January 12, 1988, Judge Bason sent a 14-
page letter to Chief Judge Wald with copies to every judge on the
Court of Appeals. For the most part, the letter underscored Judge
Bason's qualifications and his supervisory administrative
abilities, the lack of which he claimed was the only stated reason
for his not being reappointed.

The letter also raised for the first time the allegation that
DOJ may have obstructed Bason's reappointment. Specifically, the
letter stated:

A number of lawyers and others have suggested
to me that there may be a more sinister,
hidden force behind what has happened. They
suggest that somehow the Department of Justice
has undertaken to influence the judicial
selection process as a means of retaliation
against me for my recent rulings in Inslaw,

Inc. , v. United States Department of Justice .

In response to our questions, Bason recently identified three
people as the "lawyers and others" to whom he referred in his
letter. They are Nelson Deckelbaum, Marcie Docter (an attorney for

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inslaw ) and Nelson Kline. According to Bason, each of these people
separately commiserated with Bason and speculated that his decision
in inslaw must have been the cause of his not being reappointed.
None of these three people provided Bason with any support for
their suspicions. in fact, when Bason asked Deckelbaum for the
grounds for his remark, Deckelbaum admitted that he had no
evidence; it was just a feeling.

Bason also believes that there was a general feeling among the
bankruptcy bar in the District of Columbia that he should have been
reappointed. Bason bases this statement on a conversation he had
with a reporter for the Washington Post whose name he could not
recall. Presumably, the reporter was Elizabeth Tucker, who
investigated the matter for the Post . She told Bason that she had
called twenty to thirty attorneys and that they all said that Bason
was an excellent judge and that they could not understand why he
was not reappointed.

C. DOJ 1 s Motion to Recuse Bason

Soon after receiving a copy of Judge Bason’s letter to Chief
Judge Wald, DOJ moved to recuse Bason from further proceedings in
Inslaw . The motion's purpose, of course, was to disqualify him
from the case before he could either issue a written order
consistent with his oral ruling against DOJ or rule on the damages
portion of the case.

1 . Prior Consideration of a Recusal Motion

This was not the first time that DOJ had considered moving to
disqualify Judge Bason in Inslaw , indeed, in June of 1987, DOJ was

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considering internally whether there was a sufficient legal basis
for moving to disqualify judge Bason. The trial on the merits of
Inslaw’s complaint had not yet begun, but attorneys for DOJ already
had reason to predict an adverse outcome at trial. As early as
July 2, 1985, Judge Bason found William Hamilton's testimony to be
"highly credible" and concluded that a former Inslaw employee who
was then working for DOJ possibly had a "personal vendetta" against
Inslaw. Various other rulings and comments by Judge Bason gave
DOJ's attorney’s no reason to hope for a favorable ruling on the
merits. Nevertheless, pursuant to the recommendation of DOJ's
Director of the Commercial Litigation Branch, Michael Hertz, DOJ
concluded that it then had insufficient legal grounds for seeking
Judge Bason's disqualification. In particular, DOJ knew of no
extrajudicial basis for the Judge's perceived bias against DOJ.

2 . Letter to Wald as Basis for Recusal

Bankruptcy Judge Bason's letter to Chief Judge Wald provided
such a basis. In light of Bankruptcy Judge Bason's assertion that
DOJ may have played a role in unseating him, combined with the fact
that the information came from outside the courtroom, we believe
DOJ had a satisfactory basis for moving to disqualify him. See 28
U.S.C. § 455(a) and (b)(1).

This is not to say, however, that DOJ necessarily should have
prevailed on the motion. Bankruptcy Judge Bason's statement in his
letter to Chief Judge Wald fell short of an explicit accusation of
DOJ or even a conclusion by him that DOJ played a role in the
selection process. The letter could be read as merely a reflection

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of rumors he had heard from others and not as a reflection of his
personal views.

The fact that DOJ would likely lose its motion to disqualify,
which DOJ's attorneys probably predicted, counseled against filing
the motion. Nevertheless, Bankruptcy Judge Bason had already
signalled by his prior orders and his oral ruling in Ins law that
DOJ was going to lose on the merits of the case and lose badly in
his courtroom. DOJ must have realized that it already lacked
credibility before Bason in the case and concluded that it would be
better off before any other judge. Thus, despite the odds against
success, DOJ had little to lose by trying to disqualify the judge.

With the benefit of hindsight, we know that DOJ's hopes of
disqualifying Bankruptcy Judge Bason were not realistic.
Bankruptcy Judge Bason predictably denied the motion. Chief Judge
Robinson of the District Court denied DOJ's request for a writ of
mandamus, ruling that DOJ’s declaration in support of its
disqualification motion was "inadequate." DOJ raised the issue
again in its direct appeal of the final order to the District
Court. District Judge William Bryant, who was assigned the case on
appeal, found "no basis in fact to support" the motion for recusal.

Despite these adverse rulings, we do not conclude that DOJ
acted improperly or even imprudently in seeking disqualification.
The recusal effort, while admittedly a long shot, was not
absolutely destined to fail. Rather, it was an understandable and
reasonable attempt to avoid further adverse rulings from a judge
who DOJ had little reason to believe would be inclined to rule in

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its favor. under those same circumstances, we likely would have
filed the same motion.

3 . House Judiciary Committee's Implied Criticism
Immediately preceding the conclusion of its Investigative
Report, the House Committee on the Judiciary details DOJ's efforts
to disqualify Bankruptcy Judge Bason. The report reaches no
conclusion about DOJ's efforts in this regard. Indeed, it
expresses no explicit criticism of DOJ on this issue.
Nevertheless, criticism is implicit in the report's discussion of
the subject.

The report first details DOJ's internal consideration of the

recusal issue and its conclusion that there were insufficient

grounds for recusal. It then states:

On October 29, 1987, [Deputy Assistant Attorney

General of the Civil Division Stuart] Schiffer wrote in
a memorandum to the Chief of the Civil Division that:

Bason has scheduled the next [INSLAW3
trial for February 2 [19883 . coincidentally,
it has been my understanding that February 1
[19883 is the date on which he [Bason3 win
either be reappointed or replaced.

Judge Bason learned from Chief Judge Patricia Wald,

U.S. Court of Appeals, that he would not be reappointed
to the bankruptcy bench on December 28, 1987.

On January 19, 1988, the Department filed a motion
that Judge Bason recuse himself from further
participation in the case, citing that he was biased
against the Department. This motion was filed even
though Michael Hertz [the Director of the Department's
Commercial Litigation Branch, Civil Division] had
previously advised against such a move.

The important detail that the House Committee Report neglects
to mention is the fact that Bankruptcy Judge Bason's letter to

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Chief Judge Wald was written after Hertz recommended against the
recusal effort. That letter significantly changed the analysis.
DOJ might be criticized, although we think unfairly, for filing a
motion that had little chance of success. It should not be
criticized for filing such a motion in the face of Hertz's
recommendation. DOJ's motion was based on Judge Bason's letter,
not on the facts that Hertz had before him when he analyzed the
disqualification issue.

D. Bason's Lawsuit

Bason's letter to Chief Judge Wald and the rest of the Court
did not result in his reinstatement. On February 1, 1988 -- seven
days before the expiration of his term -- Bason filed a lawsuit and
a motion for a temporary restraining order in the federal district
court seeking to enjoin Martin Teel from being sworn in. 84 Judge
Bason's complaint incorporated his letter of January 12, 1988, to
Chief Judge Wald, but it did not otherwise allege or refer to the
allegation that DOJ interfered with the appointment process.

Bason's lawsuit was unsuccessful. He left the bench on
February 8. On January 25, 1988, just prior to his departure, he
issued a written opinion in favor of Inslaw and sharply critical of
DOJ. During the week before his departure, he issued an award of
damages and attorneys' fees against DOJ.

84 Bason filed a similar lawsuit when he was denied tenure by
American University College of Law in 1972. As with his suit
against the Court, he challenged the process and the fact that he
was not provided with reasons for being denied tenure. After
summary judgment for the University was reversed and remanded for
trial, the parties settled out of court.

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E . More Detailed Allegations

Bason added details to his allegations about the DOJ's
involvement in the decision not to reappoint him when he testified
and spoke to the House committee on the Judiciary.

1 . The Overheard Remark of a DOJ Attorney

Bason told the committee, and repeated to us, that one of
William Hamilton’s children overheard a DOJ attorney state during
a March 1987 hearing in the Inslaw case that "We've got to get rid
of this judge."

As inappropriate as such a remark is, it does not evidence an
intent to obstruct Bason's reappointment. The reappointment
process had not even begun at the time the remark was allegedly
made. Nor had Bason yet expressed an interest in reappointment,
although such an interest was predictable. Additionally, DOJ’s
frustration with Bankruptcy Judge Bason was likely palpable by the
Spring of 1987. We do not know if the remark was made and, if it
was, who made the remark or in what context, but we would not be
surprised if the frustration DOJ attorneys felt found expression in
an articulated desire to "get rid" of Judge Bason, meaning only
that the attorney wished that the case were assigned to another
judge. No one can dispute that doj would have liked to have the
case reassigned. It formally evaluated the possibility of
achieving that end soon after the remark was allegedly made.
However injudicious the alleged remark may have been, it does not,
in our opinion, provide any evidence of improper doj involvement in
the decision not to reappoint Bankruptcy Judge Bason.

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2 . Reporter Chris Welles

Bason also advised the House Committee and us that Chris
Welles, a reporter with Business week Magazine , told him that a
high-level DOJ official boasted to him that DOJ had been
responsible for his non- reappointment . We asked Welles about this
statement. He could not recall ever having made it. He responded
that, if he had had such a credible source, he would have published
the statement in his article about Inslaw. No such statement was
published. To the contrary, Welles' article states that "[T]here
is no evidence that Justice influenced the selection made by the
Court of Appeals.”

Welles speculated that Bason may have misinterpreted Welles'
questions or comments during their discussion of Bason's non-
reappointment. For example, Welles may have spoken to someone at
DOJ who commented on the 'outrageousness of Bason's Inslaw opinion
and who said the Court of Appeals must have been influenced by that
opinion. Welles advised us that, although he could not recall
having done so, he may have related such a statement to Bason, who
interpreted Welles as saying that a source in doj confirmed that
the Inslaw ruling (and DOJ) influenced the Court of Appeals.
Welles said no such thing. He had no such source. As he told us,
he would have loved to have had such a source.

3 . Stuart Schiffer

Bason also told the Committee and us that Welles speculated
that Judge Johnson was approached privately and informally by one
of her "old and trusted friends from her days in the Justice

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Department." It has been suggested to the Committee and to us that
the most likely candidate for such an approach is Stuart Schiffer,
then the Deputy Assistant Attorney General for the Civil Division,
who had supervisory responsibility over the inslaw case.

Judge Johnson and Stuart Schiffer were office partners when
both began their legal careers as staff attorneys with DOJ in the
early 1960's. They have stayed in touch over the years, mostly
when Judge Johnson has called Schiffer to recommend one of her
clerks for employment with DOJ.

Judge Johnson did call Schiffer during the merit selection
process. As soon as Johnson told schiffer the general subject of
her call, the selection of a Bankruptcy Judge, he advised her that
DOJ had a sensitive matter pending in front of Bankruptcy Judge
Bason. Judge Johnson replied that she was not calling about Bason
and that she did not want to hear anything about Bason; she wanted
Schiffer' s candid appraisal of two candidates from DOJ who were on
the Panel's "short list." One of them was Martin Teel. Schiffer,
who has always worked in the Civil Division, knew nothing about
Teel, who worked in the Tax Division. He explained DOj's divisions
to Judge Johnson and provided an evaluation of the other candidate
about whom Judge Johnson inquired. Schiffer said nothing about
Bason.

Schiffer is identified in the House Report as a DOJ official
who may have soured Judge Johnson on Bankruptcy Judge Bason. Yet,
the Committee never questioned Schiffer. Indeed, according to

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Schiffer, no one ever asked him about his conversation with Judge
Johnson prior to our interview.

The House Report states, "The committee has no information
that Judge Johnson talked to Mr. Schiffer about Inslaw, Judge Bason
or the bankruptcy judge selection process." Although this
statement can be read as consistent with Johnson's and Schiffer' s
statements to us, we question whether the Committee was fully aware
of all the facts concerning the Merit Selection Panel's review of
the background of candidates . A conversation about two candidates
for the bankruptcy judgeship is not necessarily a conversation
about "the bankruptcy judge selection process." We do not know
whether the Committee intended such narrow meaning or whether it
simply did not learn of any contact between Judge Johnson and
Schiffer. Judge Johnson cannot now recall what the Committee asked
her. As noted previously, Schiffer was not interviewed by the
Committee. We have asked the General Counsel to the House
Judiciary Committee for copies of witness statements. We have not,
however, received a response.

4 . Judge Tim Murphy

Bason also suggested that former D.C. Superior Court Judge Tim
Murphy was another possible candidate for a private approach by DOJ
to Judge Johnson. Johnson and Murphy had been colleagues when
Johnson served in D.C Superior Court. Murphy left the bench in
1985 and went to work for DOj with C. Madison Brewer as Assistant
Director on implementation of the PROMTS software. Obviously,

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Murphy was in a position to and did know about DOJ's problems and
frustration with Judge Bason.

The suggestion that Murphy may have influenced the bankruptcy
judge selection process appears to us to be nothing but rank
speculation. Murphy advised us that he was not especially close to
Judge Johnson, although they had been colleagues many years ago and
even though he had worked with her husband. He advised that Judge
Johnson is extremely independent and she never consulted him about
anything, except possibly when they were on Superior Court
committees together. Murphy stated that he had no contact with
Judge Johnson about the bankruptcy judge selection process; he did
not even know that she was involved in that process until we
questioned him.

5 . Kevin Reynolds /William Hamilton

More recently. Bason reported that he had heard third-hand
that someone at doj bragged that he knew all about Bason's non-
reappointment and that accomplishing that feat had been "as easy as
turning off a light switch." Bason identified Kevin Reynolds as
the source of this statement and understood that Reynolds received
the information from William Hamilton.

Reynolds, who now practices law in Hartford, investigated the
Inslaw matter as an aide to Senator Dodd of Connecticut and later
as a summer law clerk at McDermott, Will & Emery when that firm was
preparing Inslaw's Petition for Writ of Mandamus. Reynolds
acknowledged to us that he periodically speaks with and receives
information from William Hamilton. He also has spoken with Bason,

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although not recently. He stated that, while he was investigating
the Inslaw matter, he received information from a large number of
sources, some of whom he characterized as "not credible." Reynolds
could not recall ever hearing or using the expression "as easy as
turning off a light switch." Nor could he recall ever hearing that
someone at DOJ bragged about having played a role in Judge Bason’s
non- reappointment . Reynolds had heard only that District Judge
Stanley Sporkin had supposedly mentioned that It was generally
"accepted" that Bankruptcy Judge Bason was removed from the bench
by DOJ.

We spoke with Judge Sporkin. He had no recollection of any
involvement or knowledge regarding the bankruptcy judge selection
process. He barely knew of Bason, and had little, if any, interest
in the process. He said he never commented or even speculated
about the cause of Bason's failure to achieve reappointment as a
Bankruptcy Judge.

6 . William Haxnilton/Gamett Taylor

We asked William Hamilton about the statement that Judge Bason
attributed to him through Reynolds. By letter, Hamilton stated
that former DOJ security officer Garnett Taylor knew that Anthony
Moscato, who is now Acting Director of EOUSA, played an affirmative
role on behalf of DOJ in denying Judge Bason's reappointment.
Hamilton explained that he had obtained this information from a
"senior U.S. Government official, holding a position of
considerable responsibility." Hamilton suggested that we issue a
subpoena for Taylor to appear before the grand jury. Hamilton

- 186 -

stated that, if subpoenaed and interrogated under oath, Taylor
would reveal the information that he knew.

Omitted
Fa 4- B. Crim.

Pursuant to
a. 6(e)

Hamilton refused to identify the "senior U.S. Government
official" who was the source of this information. In his letter to
us, he stated that he contacted his source and "the source declined
to permit Hamilton to furnish his name to [us] . " More recently, we
again asked Hamilton to determine whether the source might reveal
himself or, at least, agree to speak to us by telephone without our
knowing or being able to determine his location or identity.
Hamilton responded that his source's position was unchanged. 85

We also contacted Anthony Moscato. According to Moscato, he
had nothing whatsoever to do with the selection of bankruptcy
judges. He convincingly stated that he is not familiar with Judge
Norma Johnson, did not know that she chaired a selection panel, and
did not even know there was a Merit Selection Panel. He stated
that he spoke to no one about Bason's qualifications for
reappointment. He cannot explain why his and Garnett Taylor's
names would be used in the same sentence as Bankruptcy Judge Bason.
Taylor and he are not even social friends, much less confidants.

85 We had hoped to meet with the Hamiltons to question them
further about this source and other matters relevant to our
investigation. After scheduling conflicts delayed our meeting, the
Hamiltons, through their attorney, advised us that they would not
meet with us, preferring to deal directly with the new Attorney
General .

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F . Conclusion

The Permanent Subcommittee on Investigations of the Senate
Committee on Governmental Affairs devoted substantial time and
effort to the investigation of the allegation regarding the non-
reappointment of Bankruptcy Judge Bason. So did the House
Judiciary Committee. Neither committee found any evidence to
support the allegation that DOJ obstructed the reappointment of
Bankruptcy Judge Bason in retaliation for his ruling in ins law .
The only evidence that we found of anyone within DOJ trying to
influence the selection process against Judge Bason was the
evidence relating to Royce Lambreth. For the reasons stated above,
we do not believe that Royce Lambreth' s conduct was improper.
District Judge Johnson of the Merit Selection Panel and Chief Judge
Wald of the Court of Appeals both unequivocally deny that DOJ
obstructed or attempted to obstruct the reappointment of Bankruptcy
Judge Bason.

The allegation that DOJ improperly interfered with the
judicial selection process was not first lodged by an independent,
unbiased observer of the selection process. It was made by
Bankruptcy Judge Bason himself, who is convinced that he was the
best qualified candidate and who was understandably disappointed
when he was not selected. The allegation has been fed by William
Hamilton who has claimed, but declined to provide proof, that a
high-level government official with whom he has allegedly spoken
can confirm the claim. We believe that the great weight of the

- 188 -

evidence clearly supports the conclusion that there was no attempt
by DOJ to obstruct Judge Bason's reappointment.

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IX. THE ALLEGATION THAT DOJ OFFICIALS TRIED TO CONVERT INSLAW'S

BANKRUPTCY TO A LIQUIDATION, AND THEN COMMITTED PERJURY

AND FIRED A WHISTLEBLOWER TO COVER UP THIS MISCONDUCT

Inslaw alleges, and Bankruptcy Judge Bason found, that "DOJ,
acting through its employees, unlawfully, intentionally and
willfully sought to cause the conversion of Inslaw's Chapter 11
reorganization case to a Chapter 7 liquidation case without
justification and by improper means." Inslaw further alleged that
after it brought this misconduct to the attention of the bankruptcy
court, DOJ employees committed perjury in order to conceal the
truth of what happened, and that DOJ subsequently fired a
"whistleblower" in retaliation for his exposing the scheme to
convert the bankruptcy. We reviewed the evidence from the numerous
investigations that previously looked into these allegations, as
well as conducting our own interviews of those involved. Although
the matter is riot free from doubt, we conclude that there is
insufficient evidence to support a finding that DOJ planned or
attempted to convert Inslaw's bankruptcy case or engaged in any
cover-up to conceal the conduct alleged.

A. Background

When inslaw filed its bankruptcy petition in February, 1985,
it sought to reorganize under the provisions of chapter 11 of the
Bankruptcy Code. It did not seek to liquidate under chapter 7.
Pursuant to the usual bankruptcy procedures, the United States
Trustee with responsibility for the District of Columbia,
technically a DOJ employee, was assigned to monitor Inslaw's
bankruptcy case.

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At the time of Inslaw's bankruptcy petition, the United States
Trustee program was still experimental. Under that program, which
has since been extended, the United States Trustee is an impartial
third party that monitors and supervises the administration of
bankruptcy cases. In a chapter 7 case, for example, the United
States Trustee appoints a private trustee to liquidate the estate.
In a chapter 11 case, on the other hand, the united States Trustee
is responsible for monitoring the debtor in possession's business
operation and its submission of operating reports, fee
applications, plans, and disclosure statements. in chapter 11
cases the United States Trustee also has certain responsibilities
in connection with the creditors' committees. The United States
Trustee does not have the power to convert a chapter 11 bankruptcy
reorganization to a chapter 7 liquidation. The trustee does,
however, have the authority to request the bankruptcy court to
order such a conversion. Such a motion by the United States
Trustee is properly made only when the United States Trustee
believes that a conversion is in the best interests of the
creditors and the estate. Although the United States Trustee
program is administered by DOJ, it would be improper for the United
States Trustee to seek a conversion solely for the purpose of
helping DOJ to avoid contract obligations to a debtor.

1. The Primary Allegation

In the Inslaw bankruptcy case, the u.s. Trustee never moved to
convert the case from a reorganization to a liquidation.
Nevertheless, some two years after it filed its petition. Inslaw

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alleged that DOJ improperly plotted to convert Inslaw's chapter 11
reorganization into a chapter 7 liquidation.

The allegation arose from a private conversation that William
and Nancy Hamilton had with Anthony Pasciuto, a DOJ employee who
was then Deputy Director of the Executive Office of U.S. Trustees
(EOUST) . According to later testimony by Nancy Hamilton, Pasciuto
told the Kami 1 tons that the Director of EOUST, Thomas Stanton, had
pressured the U.S. Trustee assigned to the Xnslaw case, William
White, to convert it to chapter 7. Pasciuto also told the
Hamiltons that Stanton had tried to detail a talented attorney from
the U.S. Trustee's Office in the Southern District of New York to
Washington, D.C., to work on converting the Inslaw case.

This allegation found support in the initial deposition
testimony of Cornelius Blackshear, now a Bankruptcy Judge for the
Southern District of New York, and previously the U.S. Trustee in
the Southern District of New York. Blackshear swore during his
deposition that the U.S. Trustee with responsibility for the
District of Columbia, White, had called him and stated that EOUST
Director Stanton wanted the Inslaw case converted and wanted a
particular attorney from Blackshear' s office assigned to handle the
matter.

According to Inslaw's allegations, White rejected Stanton's
suggestion. When White later requested that language be added to
a confidentiality order to prohibit disclosure of confidential
Inslaw materials to DOJ employees other than those associated with
the U.S. Trustee's Office, this request was viewed as support for

* 192 -

the allegation that EOUST Director Stanton had importuned U.S.
Trustee White to do DOJ's bidding and that White wanted to protect
himself from further importuning.

According to the findings of Bankruptcy Judge Bason, the
"smoking gun" that allegedly links this plot to DOJ are Peter
Videnieks’ notes of a conversation between Videnieks and Jack Rugh,
which took place shortly after Inslaw filed for relief under the
Bankruptcy Code. Those notes reflect two items: (1) that Brewer
spoke to EOUST Director Stanton, and (2) that the Inslaw case would
be converted from chapter 11 to chapter 7. As discussed below, one
cannot tell from the notes alone what the connection is, if any,
between the first and the second item.

In fact. Brewer and Stanton did speak about the Inslaw case
soon after the petition was filed. Both men, however, deny any
mention of conversion or liquidation. Rugh and Videnieks say that
the first item in Videnieks' notes (that Brewer and Stanton talked)
was something Brewer told Rugh (and which Rugh then relayed to
Videnieks), but that the second item in the notes reflects Rugh's
expression of Rugh's own opinion. Nevertheless, Bankruptcy Judge
Bason found that the notes were proof that Brewer originated a plan
to liquidate inslaw and he enlisted Stanton in that effort.

2 . The Cover-Up Allegations

The alleged plot thickened almost Immediately after its
discovery, when Bankruptcy Judge Blackshear quickly recanted his
deposition testimony. After discussing his deposition testimony
with D.c. Trustee White and an AUSA who represented him during his

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deposition, Blackshear submitted an affidavit recanting his
testimony and asserting that he had mistaken the Inslaw case for
the UPI case. Inslaw cried foul, alleging that DOJ had procured a
perjurious recantation to cover up its plot to liquidate Inslaw.

The claim of cover-up was later buttressed by the termination
of Anthony Pasciuto' s employment following an OPR investigation.
The OPR investigation of Pasciuto was initiated after Pasciuto
admitted in open court that he had made inaccurate statements to
the Hamiltons, and that in meeting the Hamiltons he had wanted to
hurt his boss, Thomas Stanton. Inslaw alleged that Pasciuto was
fired because he blew the whistle on DOJ’s wrongdoing.

3 . The Bankruptcy Court Decision

The Bankruptcy Court heard evidence on the matter during a
hearing on Inslaw's petition for "Independent Handling"® 6 and
concluded that "DOJ acting through its employees unlawfully,
intentionally and willfully sought to cause the conversion of
inslaw's chapter 11 re-organization case to a chapter 7 liquidation
case without justification by inproper means." The court's
conclusion was based on several subsidiary findings. Bankruptcy
Judge Bason found that Stanton struck a bargain with Brewer. The
agreement was for Stanton to make efforts to liquidate Inslaw in

86 This hearing was held in response to Inslaw's request that
its complaint against DOJ be handled "entirely independent of any
DOJ officials who [were] involved in the allegations" in the
complaint. This hearing came to be known as the "Independent
Handling proceeding, " although Inslaw ultimately dropped its
request for that particular form of relief. It was during this
hearing in June, 1987, that Bankruptcy Judge Bason heard evidence
of DOJ 1 s alleged effort to convert Inslaw to chapter 7.

- 194 -

The

to rid D0J of its contract problems with Inslaw.
gj an >£.ruptcy Court found that Stanton made this commitment to curry
^ aV -or with the EOUSA and with higher DOJ officials in order to win
t h^ support of these officials for anticipated legislation that was
tc? make permanent the then - temporary United States Trustee program,
w txich he headed. To effect this liquidation. Bankruptcy Judge
0 ason concluded, Stanton agreed to put pressure on his subordinate,
vtfilliam White, to liquidate Inslaw. The court found that when
White resisted Stanton's pressure, Stanton sought to have Harry
Jones, an Assistant U.S. Trustee in New York, detailed to either
White's office in Alexandria or to Stanton's office at EOUST, in
order for Jones to accomplish the conversion. Although none of the
DOJ employees who would have been parties to or affected by the
alleged agreement testified that there was such an agreement, or
that the actions supposedly contemplated were ever discussed.
Bankruptcy Judge Bason decided that the testimony of these DOJ
employees was unworthy of belief, and, in essence, that they had
lied , 87

57 The Bankruptcy court Judge found the testimony of Stanton,
one of the principal government witnesses in the Independent
Handling proceedings, to be "evasive and unbelievable." The Court
also found Rugh, another government witness, to have given
testimony that was "simply on its face not believable."
Specifically, the Court stated that "Rugh was perhaps the Elliott
Abrams of this Bankruptcy Court because, although he managed to
maintain his composure throughout, his testimony is simply on its
face not believable." The Court did not find that Blackshear had
lied, however. The Court stated:

[Bjecause Judge Blackshear 's original
testimony is in accord with the other credible
evidence, and his recantation is not, this

(continued. . . )

- 195 -

4 . The OPR Investi gration

In response to the Bankruptcy Court's ruling- -and a complaint
filed by William Hamilton- -DO J' s Office of Professional
Responsibility investigated the allegations that Stanton, Brewer,
Rugh and Videnieks tried to obstruct the Inslaw bankruptcy
proceedings by attempting to have Inslaw converted to a chapter 7
proceeding. A related allegation- -based on Judge Bason's disbelief
of a number of DOJ witnesses - -was that certain DOJ employees and
officials had lied during the Independent Handling proceeding to
cover up the conversion attempt.

Also, in July of 1987, pursuant to a referral from the office
of the Deputy Attorney General, OPR initiated an investigation into
allegations involving Anthony Pasciuto, who at the time was still
Deputy Director for Administration of EOUST. Specifically, these
allegations - -which were subsequently spelled out by Thomas Stanton
--were that: (i) Pasciuto's meeting with the Hamiltons violated the
Standards of Conduct for Department employees; (ii) Pasciuto
provided official non-public information to the Hamiltons in
violation of the Standards of Conduct; (iii) Pasciuto violated 18
U.S.C. § 210 by agreeing to meet with the Hamiltons in exchange for

87 ( . . . continued)

Court accepts as true Judge Biackshear's
original testimony and holds that his
recantation is the result of an honest mistake
on his part.

However, several years later in January, 1991, Bason filed a
complaint with the Judicial Council of the Second Circuit Court of
Appeals against Judge Blackshear, in which Bason stated that he now
concludes that Judge Blackshear recanted not because of an honest
mistake but because he made a conscious choice to testify falsely.

- 196 -

their assistance in obtaining a position Pasciuto wanted as an
Assistant U.S. Trustee in Albany; and (iv) Pasciuto concealed
and/or misrepresented material facts regarding his meeting with the
Hamiltons from superiors and from the Civil Division attorney
representing the Department in the Inslaw matter.

In addition to reviewing the evidence presented during the
Independent Handling proceeding, OPR conducted its own interviews.
Ultimately, OPR had before it much the same evidence as was before
the bankruptcy court.

OPR concluded its investigation of Pasciuto' s conduct in
December 1987. It recommended that Pasciuto' s employment be
terminated primarily because of his admitted decision to harm his
superior, Stanton, by any means possible, including providing false
information to the Hamiltons during their meeting. In a subsequent
report issued on March 31, 1989, OPR concluded that Bankruptcy
Judge Bason's findings on the independent Handling proceeding were
"clearly erroneous," and that there was no evidence that DOJ
employees and officials had tried to put pressure on White to
convert Ins law's case into a chapter 7 liquidation. OPR further
found that there was no evidence that DOJ officials and employees
had lied during the Independent Handling proceeding to cover up the
conversion effort. OPR pointed out that the final testimony of all
the witnesses with pertinent knowledge was largely consistent: All
said there was no plan or pressure to convert. Although it was not
reviewing the propriety of Bankruptcy Judge Blackshear's conduct,
OPR credited Blackshear's recantation for a variety of reasons.

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including the fact that Blackshear had no apparent motive to lie
about the matter.

5 . The Public integrity investigation
In 1988 -- following the bankruptcy adversary proceeding and
decision- - inslaw' s attorneys complained to the Public Integrity
Section of DOJ's Criminal Division alleging that Blackshear and
White perjured themselves in testimony regarding the Inslaw
bankruptcy proceedings and that White suborned Blackshear' s
perjury. Additionally, Stuart Schiffer, Deputy Assistant Attorney
General in the Civil Division, referred to the Criminal Division an
allegation that Anthony Pasciuto, who by the time of Public
Integrity's investigation had left DOJ, 88 had committed perjury.
Specifically, it was alleged that Pasciuto had: (i) testified at

the inslaw trial that he had told the Hamiltons that there was a
conspiracy afoot in DOJ to drive inslaw into liquidation but
subsequently admitted in his trial testimony that his statements to
the Hamiltons were not based on any first-hand knowledge, and
instead were made in order to cause trouble for his boss Thomas
Stanton; and (ii) in contesting OPR's recommendation that Pasciuto
be fired, Pasciuto gave various written and oral statements to DOJ
and the news media in which he contended that his original
statements to the Hamiltons were true, which would make his trial
testimony false.

88 while Pasciuto, through his counsel, fought OPR's
recommendation that he be fired, DOJ intended to follow the
recommendation. Faced with DOJ's position, Pasciuto ultimately
(and reluctantly) resigned.

- 198 -

Public Integrity thoroughly investigated the allegations,
reviewing and analyzing the testimony and statements made by
everyone involved, and interviewing all subjects and witnesses who
would meet with them.

Public integrity concluded that perjury cases could not be
proven and that the matter should be declined. With respect to the
allegations that White and Blackshear committed perjury. Public
Integrity concluded that evidence that their testimony was false
was entirely lacking for essentially the same reason that the OPR
found no disciplinary action against DOJ employees was warranted:
The final testimony of all witnesses with knowledge was largely
consistent. As to Bankruptcy Judge Blackshear, Public Integrity
noted that he had given credible explanations for his change in
testimony.

With respect to allegations of perjury against Pasciuto,
Public Integrity concluded that prosecution should be declined
because the only sworn testimony by Pasciuto available to Public
Integrity was Pasciuto' s trial testimony- -and all the evidence
suggested that Pasciuto' s trial testimony was truthful. Public
integrity noted that it had been informed by Pasciuto' s counsel
that Pasciuto had given testimony contrary to his trial testimony
before the Senate PSI, but at that time transcripts of that
testimony were unavailable. Furthermore, assuming Pasciuto' s
testimony to the Subcommittee was that Stanton had tried to convert
Inslaw, Public Integrity noted several discretionary factors which
counseled against criminal prosecution. Charging Pasciuto could

- 199 -

leave DOJ vulnerable to the charge of conducting a political trial
based on vindictiveness against a DOJ employee who claimed to be a
whistleblower. Public Integrity also noted that Pasciuto had
already lost his job and endangered his career. From reading his
testimony and hearing accounts of his demeanor at trial. Public
Integrity viewed it as clear that Pasciuto was emotionally near the
end of his rope. Public Integrity concluded that there was no good
reason to add to his difficulties.

6 . The Senate Subcommittee’s investigation

The investigation of these allegations has not been limited to
the bankruptcy court and DOJ. The Senate's PSI also investigated
the matter. In the course of its investigation, the Subcommittee
Staff deposed Pasciuto, Harry Jones (the Assistant Trustee from the
Southern District of New York who was to be detailed to the Inslaw
case) and Thomas Stanton. The Subcommittee's Staff also
interviewed Cornelius Blackshear and William White.

In its report, which issued in September 1989 , the
Subcommittee Staff found "no proof that an effort to convert
Inslaw's bankruptcy proceedings was conducted by individuals beyond
those the Bankruptcy Court had found responsible [i.e., Stanton and
Brewer]." The Staff Report said that, while there was conflicting
evidence as to whether Stanton went so far as to urge White to
convert the Inslaw case into a liquidation, it was clear that
Stanton urged special treatment for the Inslaw case. The Staff
said that Stanton's only motive in giving special treatment to the
inslaw case was because dOJ was interested in the proceeding.

- 200 -

According to the Staff, Stanton saw the Inslaw case as a means of
favorably impressing DOJ and thereby ensuring continued DOJ support
for his office. The Staff concluded that, while such actions do
not equate with the type of conspiracy that the Hamiltons had
alleged, they were, as attempts to influence the handling of the
case by the U.S. Trustee, improper.

The Staff also concluded that Bankruptcy Judge Blackshear's
recantation was implausible. The Staff noted that on four
occasions prior to his recantation Blackshear had stated that White
told him about pressure from Stanton to convert the inslaw case
and it was only after talking to White that Blackshear suggested
that he had confused Inslaw with the UPI case. 89

The Staff also discounted Blackshear's explanation that he had
confused the Inslaw case with his discussions with White about the
UPI case, during which White told him about pressure from the IRS
to convert the UPI case. The Staff found no evidence to support
this explanation. White told the Subcommittee Staff that he had
never been pressured to convert the UPI case, and representatives
of the IRS and the Tax Division of DOJ told Inslaw that their
offices had never attempted to have the UPI case converted.
Moreover, Blackshear told the Staff that one of the reasons he was
sure that he had confused Inslaw with UPI was that both he and
White had spoken at an ABA conference in 1986 about the

"The four occasions were a telephone conversation with Jane
Solomon, an acquaintance of Judge Blackshear who called him at the
request of Inslaw's attorneys, two interviews with Inslaw's
attorneys, and Blackshear's first deposition in the Independent
Handling proceeding.

- 201 -

independence of the U.S. Trustee program and that both had used the
UPI case as an example of how trustees could resist pressures upon
them from other units of DOJ. White told the Staff that he had not
talked about the UPI case at the conference, however, and the Staff
obtained official tape recordings of the conference, which showed
that at no time during his presentation did Blackshear mention the
UPI case.

7 . The House Judiciary Committee Investigation

The House Judiciary Committee also investigated the
allegations regarding the conversion issue. The Committee has not
made the materials, interviews, and documents underlying its report
available to us. It appears to us from the House Committee's
report, however, that most of the witnesses interviewed by the
House Committee provided statements essentially consistent with
their most recent testimony.

In its report, the Committee credited Pasciuto's testimony to
it and the original testimony of Bankruptcy Judge Blackshear, and
implicitly criticized DOJ for holding Pasciuto accountable for his
discussions with the Hamiltons while "excus[ing]" Bankruptcy Judge
Blackshear for making statements identical to Pasciuto's. Although
the Committee did not expressly conclude that DOJ officials and
employees had schemed to have Inslaw converted to Chapter 7
bankruptcy, it did state that "[t3he committee encountered numerous
situations that pointed to a concerted effort by Department
officials to manipulate the litigation of the Inslaw bankruptcy, as
alleged by the president of Inslaw."

- 202 -

B. Our Analysis

in investigating these allegations, we reviewed all the
records from the bankruptcy court proceedings, as well as all
available records from the prior DOJ and Senate Subcommittee
investigations outlined above. We also attempted to interview
personally most of the relevant witnesses. Based on our review of
this evidence we believe that there is insufficient evidence to
conclude that DOJ pressured the U.S. Trustee to attempt to convert
the Inslaw Bankruptcy case or otherwise improperly interfere with
the case, or that DOJ attempted a cover-up. What follows is a
discussion of why we believe the evidence does not support a
finding of wrongdoing.

1 * Brewer's Conversation with Stanton
There is no question that Brewer and EOUST Director Stanton
discussed the Inslaw case. Shortly after Inslaw filed its

bankruptcy petition in February 1985, Director of EOUST Thomas
Stanton called william Tyson, the Director of EOUSA, to advise him
of the filing. Tyson was not in when Stanton called, and Stanton
left a message. Brewer returned Stanton's call for Tyson. During
his conversation with Stanton, Brewer asked for copies of Inslaw's
bankruptcy petition, and Stanton agreed to get them. Stanton then
called U.S. Trustee White to ask for copies. White provided
Stanton with the petition, which Stanton sent to Brewer. Stanton
and Brewer claim that this was the only conversation they ever had
about the Inslaw bankruptcy, and that this was the sum and

- 203 -

substance of that conversation . 90 Moreover, prior to this
telephone conversation, Stanton and Brewer had not spoken before
and did not know each other.

Thus, there is no direct evidence that Brewer (or anyone else
from DOJ) asked Stanton to try to convert Inslaw's bankruptcy to a
liquidation. That evidence is entirely circumstantial.

There are essentially six pieces of circumstantial evidence
that arguably support this allegation: (1) Pasciuto's statements;
(2) the Videnieks' notes; (3) the testimony of Gregory McKain; (4)
the language that White proposed as an addition to Judge Bason's
confidentiality order; (5) Blackshear's statements to Inslaw's
bankruptcy attorneys and Judge Solomon prior to his first
deposition and his testimony at his first deposition; and (6) the
consideration that was given to transferring Assistant U.S. Trustee
Harry Jones from the southern District of New York to the District
of Columbia to work on the Inslaw case. For the reasons discussed
below, we do not find these pieces of evidence, either individually
or cumulatively, sufficient to conclude that DOJ was guilty of any
of the alleged wrongdoing.

2. Pasciuto's Allegation that Stanton Pressured
White to Convert the inslaw Case

On March 17, 19 87 --during the pendency of the Inslaw
bankruptcy litigation with DOJ- -Anthony Pasciuto, who was then

90 Stanton testified that, some time later, Stanton ran into
Brewer. Brewer introduced himself to Stanton and said "you thought
you were done with INSLAW but you are about to get subpoenaed."
Stanton maintains that they did not discuss Stanton's testimony or
anything about INSLAW.

- 204 -

Deputy Director of Administration for EOUST, and who worked under
Stanton, contacted the Hamiltons because he had been told that they
had connections that could help him obtain a trustee appointment in
Albany, New York, which he desired. Pasciuto met with the
Hamiltons. During the course of the meeting, according to Nancy
Hamilton, Pasciuto told them that Stanton had exerted pressure on
White to convert the case to chapter 7 and that Stanton had tried
to assign Harry Jones to White's office in order to work on
converting the Inslaw case. Pasciuto said he got this information
from Blackshear and White.

But Pasciuto himself testified during the Independent Handling
hearing that no one had ever told him that Stanton had pressured
White to convert the case to a chapter 7 liquidation, that he did
not recall telling the Hamiltons about any pressure to convert the
Inslaw bankruptcy, and that he had no personal knowledge of the
subject. He went on to say that if he did tell the Hamiltons of
such pressure to convert, then that was his recollection at the
time, but he was very upset and would have done anything, including
exaggerating and making things up, to hurt Stanton (who was his
boss and with whom he was having problems) . Pasciuto did add,
however, that at a meeting in New York with Blackshear and U.S.
Court of Appeals Judge Lawrence Pierce, Blackshear made some
statement about learning from White that Stanton had pressured
White to convert Ins law. Pasciuto did not remember the words that
Blackshear used or what exactly Blackshear said.

- 205 -

Pasciuto told the OPR attorneys essentially the same version
of events that he recounted to the bankruptcy court. Specifically,
Pasciuto told OPR that all of the information he told the Hamiltons
regarding pressure to convert Inslaw was second or third hand, that
he told the Hamiltons to talk to Blackshear and White, and that
Blackshear had been requested to provide staff help to White.
Pasciuto again said that no one was being sent to convert the
Inslaw case, but rather it was a matter of sending someone to help
White with the case because he needed assistance.

Based on Pasciuto' s admissions that he made false statements
to the Hamiltons in order to harm Stanton, OPR recommended that
Pasciuto be fired. After this recommendation, Pasciuto' s testimony
changed.

In a letter sent by Pasciuto' s attorney to DOJ following OPR's

recommendation that Pasciuto be dismissed, Pasciuto' s attorney

argued against termination. The attorney claimed that what

Pasciuto had told the Hamiltons was true, and that Pasciuto had

backed away from those statements at trial because Blackshear and

White would not acknowledge the truth and because Stanton was

putting pressure on Pasciuto to "play ball" if Pasciuto wanted to

get his appointment as a trustee in Albany. Specifically, in this

letter, Pasciuto 's attorney claimed that:

--Pasciuto had a long-standing personality conflict with
Stanton, culminating in early 1987 in Pasciuto 's belief
that Stanton wanted to fire him;

- -A friend suggested that Pasciuto meet with the
Hamiltons, and Pasciuto felt that the Hamiltons would
know that DOJ was treating him unfairly;

- 206 -

--At this meeting with the Hamiltons, Pasciuto told them
that Stanton had pressured Blackshear to detail Jones to
White's office to convert Inslaw and that Blackshear had
told Pasciuto of Stanton's plans;

--After this meeting, but before his testimony before the
bankruptcy court, pasciuto learned that Blackshear 1 s
original deposition testimony corroborated Pasciuto’ s
recollection of their conversation regarding Stanton's
efforts to convert Inslaw and that Blackshear had
subsequently recanted that testimony and that White could
not recall a conversation with Pasciuto regarding inslaw;

--as a result of learning that there was no corroboration
of his assertions regarding Stanton's attempts to
pressure the conversion of the Inslaw bankruptcy,
Pasciuto became very fearful since he was now alone in
making this accusation against Stanton;

--Stanton put job-related pressure on Pasciuto on account
of Pasciuto' s statements about Stanton's attempt to
convert the inslaw bankruptcy;

--Pasciuto felt tremendous pressure over this matter,
and, when he gave his trial testimony, he was not
adequately prepared by the DOJ trial attorney and was
"overly circumspect" about his testimony and tried to
somehow get out of the difficult position he found
himself in by testifying primarily about the way Stanton
had been treating him; and

--In July 19 87, at a social function in the home of Harry
Jones, Blackshear came up to Pasciuto and told him that
"you told the truth ... I got confused ... I thought that
by changing my story I would hurt less people . . . the
easiest thing to do was recant ...."

Before the Senate Subcommittee, Pasciuto testified {in most
respects consistently with his attorney's letter to DOJ) that White
had told him that Stanton had pressured White to take some sort of
action with respect to Inslaw, that Blackshear had stated in
Pasciuto' s presence that Stanton had pressured Blackshear to send
Jones to Washington to work on inslaw, and that Blackshear had told
Pasciuto that he had recanted in order to "hurt less people."

- 207 -

According to the House Committee Report, Pasciuto told the
Committee's investigators that he attended a January 1987 luncheon
meeting with Blackshear, Judge Lawrence Pierce, Harry Jones and
Elliott Lombard. The House Committee Report says that during this
meeting Blackshear described Stanton’s attempt to pressure
Blackshear into sending Jones to work on the Inslaw bankruptcy.
Pasciuto apparently testified that it was clear in Pasciuto' s mind
that Blackshear implied that Stanton wanted inslaw converted to
chapter 7 status and needed Jones to accomplish this. Pasciuto,
consistent with his attorney’s letter to DOJ, said that his
testimony at the Independent Handling hearing was the result of
pressure from DOJ.

During our interview of Pasciuto he essentially maintained the
position that the statements set forth in his attorney's letter are
the truth. Specifically, Pasciuto told us that at a luncheon
meeting in judge Pierce’s chambers, Blackshear said something about
Thomas Stanton wanting Jones to go to White's office to help with
Inslaw. Blackshear told Pasciuto he refused, and Blackshear
expressed concern about the pressure from Stanton. Pasciuto told
us that he was left with the clear impression that Stanton was
trying to get Blackshear to send Jones to White's office to convert
Ins law. Pasciuto cannot, however, recall what words Blackshear
used or what it was that Blackshear in fact said, and Pasciuto does
not remember whether the word "conversion" was ever used.
Additionally, Pasciuto said that his testimony at trial differed
from his current version of events because the DOJ attorney did not

- 208 -

adequately prepare him for his testimony, because he knew that
neither Blackshear nor white would corroborate his testimony, and
because Stanton put job related pressures on him.

For several reasons Pasciuto* s statements and testimony are
extremely unreliable.

First, Pasciuto has never claimed to have personal knowledge
or first-hand information about anything related to the alleged
plot to convert the Inslaw case. His knowledge has only been
second and third hand.

Second, Pasciuto in his testimony before the Bankruptcy Court
acknowledged that neither White nor Blackshear had told him that
Stanton had pressured White to convert the inslaw bankruptcy.

Third, Pasciuto 's most recent statements are little more than
inarticulate, and inadmissible, impressions. For example, Pasciuto
claims that during a luncheon meeting with Pasciuto and Circuit
Judge Pierce of the United States Court of Appeals for the second
Circuit Blackshear said something about Stanton having wanted
Blackshear to send Jones to White's office to work on the Inslaw
case. While, according to Pasciuto, Blackshear' s statements left
him with the distinct impression that Stanton was doing this in
order to have the Inslaw bankruptcy converted to a chapter 7
liquidation bankruptcy, Pasciuto cannot remember what Blackshear
said that left him with that impression. Moreover, the other
participants in this conversation, Blackshear and Judge Pierce, do
not remember anything at all being said about Inslaw. Thus, not

- 209 -

only is Pasciuto's current version based on sheer hearsay, the
hearsay itself is entirely without corroboration.

Finally, Pasciuto is utterly impeachable. During the
independent Handling proceeding, Pasciuto said, under oath, that if
he said anything about an effort to convert to the Hamiltons, he
may have exaggerated or falsified things in order to hurt his boss
Stanton, with whom he was having difficulties at work and who he
believed was hindering his appointment to a desired Assistant
Trustee position in Albany. Pasciuto later claimed that he had
testified this way at the Independent Handling proceeding because
he knew Blackshear and White would not corroborate his testimony
and because of job related pressures. Pasciuto, however, made this
later claim for the first time in his attorney's response to the
recommendation by OPR that he be fired for providing false
information to the Hamiltons in order to hurt Stanton. Thus, the
argument is strong that Pasciuto's later claim was made in order to
try to save his job . 91

91 in its Report, the House Judiciary Committee implicitly
criticizes DOJ for seeking to fire Pasciuto and thereby holding
Pasciuto "very accountable for his discussions with the Hamiltons, "
while not prosecuting Judge Blackshear for perjury, thereby
excusing him for making statements identical to Pasciuto's. We
believe this criticism is unjustified. At the time OPR recommended
that Pasciuto be dismissed, he had told OPR- -consistent with his
testimony at the Independent Handling proceeding* - that he made
exaggerated and false statements to the Hamiltons in order to hurt
Thomas Stanton. It was only after OPR recommended that Pasciuto be
terminated that Pasciuto changed his story- -yet again- -and claimed
his statements to the Hamiltons were true. In contrast, Judge
Blackshear has always maintained that at the time he made the
statements in his first deposition, he believed them to be true,
and that it was only after he made the statements that he realized
he had been mistaken and corrected himself. Furthermore, DOJ did

(continued. . . )

- 210 -

3 .

The Videnieks 1 Notes

In February of 1985, Jack Rugh had a telephone conversation

with Peter videnieks. Videnieks made a handwritten note of the

conversation, which read:

2/20/85 JR called re/'our computer, 1 Brick
talked to Stanton . . . ’no way’ 11 will be

'7.* Need home for computer

Rugh testified that he did not remember this conversation with
Videnieks, but that the note accurately reflected his view of
Inslaw's prospects at the time, and his belief that Inslaw would
end up in liquidation bankruptcy. Rugh was pessimistic about
Inslaw's financial future even before the company filed for
bankruptcy- Rugh thought that DOJ accounted for most of Inslaw's
business and, in February 1985, he knew that Inslaw’s contract with
DOJ would expire in less than a month. Videnieks also testified
that, while he did not have a specific recollection of the
conversation, he believed that Rugh told him that he (Rugh)
believed that Inslaw would end up in chapter 7.

Bankruptcy Judge Bason interpreted this note to mean that
Stanton had assured Brewer that the inslaw bankruptcy would be
converted to chapter 7. This interpretation of the videnieks'
notes is not entirely implausible when viewed in the light of the
testimony of Gregory McKain, which is discussed in the following
section. It is, however, inconsistent with the testimony of every

91 ( . . . continued)

not have the authority to dismiss or otherwise reprimand Judge
Blackshear. For the reasons previously discussed. Public integrity
concluded (correctly, we believe) that there was insufficient
evidence to prosecute Judge Blackshear for perjury.

* 211 -

witness who has personal knowledge of the conversations reflected
in the notes. The interpretation given the notes by videnieks and
Rugh is not only equally reasonable, but is supported by virtually
all the evidence. There is a space in the notes between the words
"Brick talked to Stanton" and the words "no way 11 will be 7." It
is thus reasonable to infer that Rugh told Videnieks that Brewer
talked to Stanton (which Brewer had- -at least about getting the
inslaw pleadings) , and that, apart from that, Rugh told videnieks
that he thought Inslaw would end up in chapter 7. This is what
Rugh and videnieks say they think happened. Because this
interpretation is both reasonable and consistent with virtually all
other evidence, we are unable to conclude that this note means that
Stanton told Brewer that he would see to it that Inslaw would end
up in chapter 7 .

4 . McKain 1 s Testimony

On about February 21, 1985, shortly after Inslaw had filed for
protection under the Bankruptcy Code, Rugh talked with Gregory
McKain, an Inslaw employee, to ask him whether he would be
interested in working for DOJ. Rugh had been very impressed for
some time with McKain' s work and had discussed with McKain on
several occasions the possibility of McKain working for DOJ.
McKain testified that during their conversation, Rugh told him that
DOJ had talked to the "Trustees" who said that inslaw would not
survive in chapter 11 bankruptcy and would probably be in chapter
7 within 30 to 60 days. Rugh testified that he might have told
McKain that there had been a conversation with the U.S. Trustee's

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office because he understood from Brewer that there had been such
a conversation. Rugh also said, however, that as far as he knew,
the Trustee' a Office had not said that inslaw would not make it in
chapter 11. He was not aware of what view, if any, the Trustee's
Office had on’ Inslaw's prospects. Rugh testified that he told
McKain that Inslaw would not be able to survive in chapter 11
because that was his own view.

Following his conversation with Rugh, McKain told his boss,
William Hamilton, of his (McKain's) version of the conversation
with Rugh. Hamilton assured McKain that the company would continue
in business. Hamilton was upset by the conversation between Rugh
and McKain and called one of his bankruptcy lawyers, Stanley Salus,
to ask him to look into the matter. Salus and Inslaw's other
bankruptcy attorneys called U.S. Trustee White and told him
McKain's version of Rugh's call. White promised to investigate and
assured inslaw’ s counsel that his office was and would remain
independent of DOJ in the matter. Later that day. White called
Salus and told him that he had been assured that his staff had
expressed no opinions to DOJ regarding the likelihood of a
successful reorganization. White also assured Salus that nothing
other than public records would be given to DOJ.

Although McKain's testimony at the Independent Handling
proceeding gives some circumstantial support for the conversion
theory, Rugh has testified to a different version of this
conversation. Rugh claimed that he himself believed that inslaw
would end up in liquidation and he merely expressed that personal

- 213 -

opinion to McKain. Arguably there is no more reason to think that
Rugh is lying about this than there is to think that McKain is. If
Rugh can be said to have lied to protect his employer, DOJ, it is
equally plausible that McKain lied to help his employer. Inslaw.
It is equally possible, of course, that Mr. McKain simply
misunderstood what Mr. Rugh had said. In the end, McKain' s
testimony provides some support to the conversion theory, but not
enough to satisfy us that the theory is true.

5 . White's Addition to Confidentiality Order
On July 11, 1985, the Bankruptcy Court ordered that certain
information filed by Inslaw be kept confidential. U.S. Trustee
white reviewed that order before it was signed and, at his
suggestion, the following sentence was added to the last paragraph
of the order:

No other employee or agent of the Justice
Department [i.e., other than in the office of
the United States Trustee] shall have any
access whatsoever, directly or indirectly, to
the confidential materials covered by this
order.

Bankruptcy Judge Bason found during the Independent Handling
hearing that white requested this language to protect himself from
importuning by Stanton.

We do not believe the evidence supports Bankruptcy Judge
Bason's finding. William white has explained that he asked for
this language to preclude criticism such as Inslaw’s counsel, Mr.
Salus, had made to him the preceding February following the Rugh-
McKain conversation, white explained that he sought to preclude
such criticism by ensuring that only personnel in his office would

- 214 *

be involved in the case. No evidence contradicts White's

explanation for including this language and there is no good reason
*

for doubting White's word. The evidence clearly indicates that
White did not think highly of Thomas Stanton. So there is no
reason to doubt that had there been an improper attempt to
influence White, White would have so testified, particularly when
he was no longer a U.S Trustee and had gone into private practice.
Bankruptcy Judge Bason speculated that White's very independence
from EOUST somehow cast doubt upon white's testimony. According to
Bason, White’s "memory" was faulty because he had returned to
private practice and he might think he would have difficulties
practicing bankruptcy law if he antagonized the Executive Office of
U.S. Trustees. But there is no evidence that suggests that White's
practice was dependent upon the goodwill of EOUST, or that White
would lie under oath even if his livelihood were affected by EOUST.

6 . Cornelius Blackshear

On March 25, 1987, inslaw attorneys deposed Blackshear, a

former U.S. Trustee in New York who by that time had become a
United States Bankruptcy Court Judge for the Southern District of
New York. Bankruptcy Judge Blackshear initially testified that
White had told him that Stanton had tried to pressure White to
convert the case and to have Jones assigned to white to effect the
conversion. Blackshear also testified that Stanton had never
contacted him about detailing Jones to work on the Inslaw case, but
he thought Stanton might have approached Jones on the subject
directly. White, on the other hand, had been deposed shortly

- 215 -

before Blackshear and had testified differently. In his
deposition, White testified that while Stanton had inquired of him
about the Inslaw case, Stanton had not tried to exert any pressure
on White to convert Inslaw. White also testified that Blackshear
had told him that Blackshear' s assistant Harry Jones was going to
be detailed to Washington to work on Inslaw, but Blackshear did not
say the detail was for the purpose of converting Inslaw.

When White learned that Blackshear had testified differently
from White in his deposition. White contacted Blackshear and
eventually Blackshear and White spoke by telephone. White told
Blackshear that Blackshear was mistaken and that White had not told
Blackshear those things about the Inslaw bankruptcy. Blackshear
says that after his conversation- with White he realized that he had
been mistaken and had confused Inslaw with another case about which
White had spoken to him. Blackshear, with the assistance of his
attorney (an Assistant United States Attorney in the Civil Division
of the U.S. Attorney's Office for the Southern District of New
York) , prepared and signed an affidavit recanting his deposition
testimony. In the affidavit, Blackshear stated that at the time he
gave the deposition he believed all the things he said to be true,
but that he subsequently realized, after his conversation with
White that: (i) White had not told him that Stanton had tried to
pressure White to convert Inslaw; and (ii) Blackshear had confused
Inslaw with the UPI case, about which White had told Blackshear
that the IRS had pressured White to join in a motion to convert.
Blackshear also gave a second deposition in which he basically

- 216 -

repeated his new recollections that White had not told him that
Stanton had tried to pressure White to convert Inslaw and that he
had confused the Inslaw case with UPI.

During the OPR investigation Blackshear essentially repeated
the statements he had made in his recanting affidavit and second
deposition, stating that White had not told him that Stanton had
put pressure on him to convert Inslaw, and that Blackshear had
confused Inslaw with UPI . Blackshear, however, disagreed with
White regarding a conversation they had about the possible
assignment of his assistant Harry Jones to Washington. Blackshear
believed that White had told him that Stanton planned to bring
Jones to Washington. White, on the other hand, maintained that
Blackshear told this to White. Blackshear also denied that he had
discussions with Pasciuto at a social gathering (or anywhere) in
which he admitted that he was sorry for his conduct in the Inslaw
matter and that he had given false testimony in his recantation to
avoid hurting people.

The statements attributed to Bankruptcy Judge Blackshear in
the House Committee Report appear to differ somewhat from his prior
testimony to OPR and the Senate subcommittee. According to the
report, Blackshear stated, among other things, that the information
he provided in his prior depositions was not based on personal
knowledge but on hearsay information provided by other sources.
Blackshear apparently stated that he now remembered that much of
the information came in fact from Anthony Pasciuto. Blackshear
stated that he first became aware of the Inslaw case when Pasciuto

- 217 -

told him that Stanton was attempting to have Jones assigned to the
case. Blackshear stated that he now remembered that he did not
discuss the Inslaw conversion issue with White, but rather with
Pasciuto.

We also interviewed Bankruptcy Judge Blackshear. At the start
of the interview. Judge Blackshear gave us a document dated January
16, 1991, and entitled "Response of the Hon. Cornelius Blackshear
Re inslaw." Judge Blackshear told us that he had also provided a
copy of this document to James Lewin, an investigator for the House
Judiciary Committee, and that, upon much reflection during the past
years about this whole incident, he believes' that the document
reflects his best recollection of what happened.

Bankruptcy Judge Blackshear* s statement recounts the
following:

(1) Judge Blackshear did not communicate with White prior to
his first deposition. After talking with White after his first
deposition (and white telling him that white had never told
Blackshear that Stanton had pressured White to convert Inslaw) ,
Blackshear believed that White had not given him the information
about the conversion for two reasons: (i) upon reflection,
Blackshear honestly could not pinpoint having had a conversation
with White about a motion to convert inslaw; and (ii) White and
Stanton were not the best of friends and thus there would be no
reason for White to try to protect Stanton.

(2) During early 1985, white called Blackshear frequently
about Stanton's interference with White's office and requested

- 218 -

Blackshear's input regarding administration of bankruptcy cases in
general. During that time, Blackshear was also in constant
communication with Anthony Pasciuto. Pasciuto and Blackshear had
developed a close relationship over the years and Pasciuto kept
Blackshear abreast of developments in the Executive Office.

(3) After Blackshear became United States Trustee for the
Southern District of New York, Stanton and Blackshear had a parting
of the ways because Blackshear did not support some of Stanton's
activities in the Executive Office. One of the factors that went
into Blackshear's decision to apply for the judgeship was the
deterioration of his relationship with Stanton. Pasciuto had
disclosed to Blackshear that Stanton was attempting to retaliate
because Stanton had branded Blackshear an "ingrate." Pasciuto also
informed Blackshear of what Stanton was doing in other matters.

(4) Blackshear now recalls -- after much thinking about it --
that the information he testified to in his first deposition about
an effort by Stanton to pressure White into converting Inslaw --
came from Anthony Pasciuto, who was frequently talking to
Blackshear about things going on in the Executive Office.
Blackshear believes that Pasciuto possibly overheard Stanton
suggest that he would pressure White to make a motion of
conversion, but that Stanton's superiors probably nixed the idea.
This would explain, says Blackshear, why no motion to convert was
ever in fact made.

(5) Blackshear continues to maintain that White told him that
IRS put pressure on White to move to convert the UPI case.

-219 -

With respect to the UPI issue. Bankruptcy Judge Blackshear

gave us a copy of his testimony before the United States House of

Representatives Subcommittee on Monopolies and Commercial Law (a

subcommittee of the House Committee on the Judiciary) on March 20,

1986. Bankruptcy Judge Blackshear told us that it was during this

speech - - rather than a speech to the ABA - - that he mentioned the

UPI conversion matter. According to the transcript of that

testimony, Blackshear testified about the U.S. Trustee program and

its independence and conflict of interest issues, and stated:

I know of one other situation where the u.S.

Trustee had a problem in the sense that
another agency was involved in it, but that
agency being the IRS, was making a motion to
convert the case, and the U.S. Trustee took a
different position; and to the benefit of the
IRS, the U.S. Trustee won because the IRS on a
conversion would have received nothing. As a
result of the U.S. Trustee’s position, the IRS
did receive 100 cent on the dollar of its
claim.

Although reasonable people could differ on the subject, we do
not believe there is sufficient evidence to conclude that
Bankruptcy Judge Blackshear' s recantation of his testimony is
false. Our conclusion is based on all of . the evidence, but our
reasoning is essentially as follows:

(i) Although Blackshear had originally testified in his first
deposition that White had told him of Stanton's pressure to convert
Inslaw, Blackshear’ s recollection was subsequently refreshed and he
corrected his testimony;

- 220 -

(ii) Blackshear's refreshed recollection was consistent with
that of virtually all the other witnesses, who said that Stanton
had not exerted pressure to have Inslaw converted ; 92

(iii) There did not appear to be any reason or motive for
Blackshear to lie about this;

(iv) If Blackshear were going to lie, he would make sure his
story was consistent with White's. But although Blackshear and
White both admitted that they had spoken after Blackshear's first
deposition, they nevertheless continued to disagree about who told
whom about Harry Jones being sent to White's office and several
other matters.

Bankruptcy Judge Blackshear's pre- deposition statements and
first deposition do provide some. support for Inslaw's allegations.
But those statements were not based upon Blackshear's direct
personal knowledge of the alleged conversion plot, and we have
found no credible evidence that clearly supports the version of
events set forth in those earlier statements by Bankruptcy Judge
Blackshear.

We have also considered the fact, previously noted, that
Bankruptcy Judge Blackshear has now suggested a third version of
the events. The Judge now believes, after thinking about this for
years, that he did hear of a conversion effort by Stanton, but that
this information came from Anthony Pasciuto. It is evident to us
that as an essentially disinterested third-party, Bankruptcy Judge

92 Pasciuto is the only exception. His contrary version has
been discussed previously.

- 221 -

Blackshear had and continues to have difficulty recalling the
sources of various conversations he has had as they relate to this
matter. We believe poor memory explains this confusion, not
intentional misstatements of the facts. We do not believe, as
Bankruptcy Judge Bason apparently did, that Blackshear 1 s poor
memory means that we must accept his original testimony (in his
first deposition) rather than his refreshed testimony (after
talking to White) . His recantation, in our opinion, is the most
consistent with the facts described by other witnesses.

We do not mean to minimize the confusion that is evident from
Bankruptcy Judge Blackshear 1 s various statements. Blackshear 's
pre-deposition statements and his original deposition testimony
tended to support the allegation (albeit through hearsay) that
Stanton pressured White to convert Inslaw. In his subsequent
testimony, however, Blackshear said he had heard nothing of an
effort to convert the Inslaw bankruptcy. Most recently, Blackshear
has said that in fact he did hear about an effort to convert the
Inslaw case, but that this information came from Pasciuto. This
series of contradictory statements can only be described as
troubling. At best, it reveals a rather malleable witness who has
difficulty recalling certain conversations and events. At worst,
it shows . a lack of truthfulness on at least one occasion. The
problem for us is that if Blackshear was lying, there is
insufficient evidence to determine on which occasion he lied. It
is possible that, as Inslaw suggests, Blackshear lied when he
denied that he had heard from White that Stanton had pressured

- 222 -

White to convert the Inslaw case. That possibility seems unlikely

to us, however, because the weight of the other evidence suggests
■

that Stanton did not pressure White to convert the Inslaw case.
Although no one has suggested it up to this point, it is also at
least theoretically possible that Blackshear lied in his initial
statements when he claimed to have heard of misconduct by Stanton.
We know that Blackshear was close to Pasciuto {who was no fan of
Stanton's) and that Blackshear left his U.S. Trustee position in
part because of Stanton. Again, however, there is a lack of
credible evidence to show that this possibility is something more
than speculation.

Ultimately, we conclude that there simply is not sufficient
evidence to prove {by any standard) that Blackshear lied when he
recanted his deposition testimony.

We do not see any reason why Blackshear- -a sitting bankruptcy
judge- -would recant his original sworn testimony and then lie
repeatedly thereafter. Bason suggested that Bankruptcy Judge
Blackshear recanted because he wanted to be agreeable to White, or
because Blackshear feared that as a result of his public remarks in
support of the trustee program he would be exposed to the charge of
"hypocrisy or worse" if it were learned that he knew of an instance
in which DOJ attempted to influence a U.S. Trustee. We find it
hard to believe, however, that Bankruptcy Judge Blackshear would
for either of these alleged reasons commit perjury and jeopardize
his career on the bench.

- 223 -

7 . Stanton's Consideration of Transferring Harry Jones
Bankruptcy Judge Bason found additional support for his
findings that DOJ had improperly attempted to convert the Inslaw
case from the consideration given by Thomas Stanton, Director of
EOUST , to transferring Harry Jones to work on the Inslaw case.
Harry Jones was an assistant U.S. Trustee in the Southern District
of New York. It is clear that at some point Stanton considered
transferring Jones to the District of Columbia to assist in the
Inslaw matter. Stanton testified that shortly after Inslaw filed
its bankruptcy petition, Stanton called Blackshear, then the United
States Trustee for the Southern District of New York, and asked
Blackshear to detail Harry Jones, then an assistant to Blackshear,
to work on the Inslaw case. Stanton said that he wanted Jones to
set up the creditors' committee and to conduct the first meeting of
creditors. Stanton thought highly of Jones and he wanted Jones to
work on the initial stages of the Inslaw bankruptcy because he
thought the matter was likely to receive publicity and he wanted to
make sure that it got off to a good start. Stanton denied that
Jones was to be assigned to effect a conversion of the case. He
stated that he had not discussed with anyone at DOJ (including

Brewer) his request for Jones to work on Inslaw. According to

Stanton, Blackshear said that his office was too busy to spare

Jones. Blackshear and White, although they disagree on the

particulars of the conversation, agree that they discussed and were
aware of a request to transfer Jones to work on the case. Thus
although there is considerable conflict and contradiction among the

- 224 -

witnesses regarding the possibility of assigning Jones to the

Inslaw case, there is no question that Stanton at least briefly
»

entertained the idea.

It is equally clear that Jones was not actually sent to work
on the inslaw case. Harry Jones has testified that, while Stanton
had on occasion detailed him to other offices, he was never
requested by anyone, including Stanton, to go to Washington to work
on the Inslaw case. There is no evidence to the contrary.

Stanton has explained that he appreciated the high-profile
nature of the inslaw case within DOJ and wanted to assign Jones to
it to make sure that the case got off to a good start. Bankruptcy
Judge Bason chose to entirely discredit Stanton’s testimony,
including his reasons for his wanting to assign Jones to the case.
Bason viewed Stanton's conduct regarding Jones as additional
evidence of a plan to effect the conversion of the Inslaw case to
a chapter 7. We believe that Judge Bason's inference is
unreasonable, and that the fact that Stanton considered
transferring Jones provides no support for the conversion theory.

The scheme attributed to Stanton by the Court would have been
self-defeating. All a trustee ever could do is request conversion.
Ultimately, of course, it would be up to the Bankruptcy Court- -in
this case, Bankruptcy Judge Bason- -to rule on the motion and
actually effect the conversion. All involved agree that when
Stanton was allegedly engaged in these machinations, it was
obvious, particularly at the early stage of the proceedings, that
there was no basis for a motion to convert. It is thus difficult

- 225 -

to imagine how or why the assignment of a new assistant trustee
would further the supposed object of the alleged scheme to
liquidate Inslaw. Any decision would have to be made by the
Bankruptcy Court, even assuming that by assigning Jones to
Washington, Stanton could somehow force White to permit such a
motion to be filed.

There is, we believe, an even more compelling reason why the
inference adopted by Bankruptcy Judge Bason does not withstand
scrutiny. Stanton did not broach the subject of working on the
Inslaw case with Jones. He obviously did not come to any
understanding with Jones that Jones would file a motion to convert.
Thus, for Stanton's alleged scheme to make sense, he had to have
assumed that Jones, if assigned to the case, would make an
obviously improper motion. Harry Jones has been repeatedly
described by witnesses as a person of great integrity and an expert
in bankruptcy matters. It is inconceivable that Stanton would
choose such a person to execute his alleged scheme. Jones would
have immediately recognized that the motion was baseless and
refused to make it.

C. Conclusion

Based on our investigation, we conclude that there is not
sufficient evidence to establish that DOJ and Stanton endeavored to
have the Inslaw case converted. There are a number of reasons for
our conclusion.

- 226 *

1 . The Alleged Scheme To Convert

First, the allegations have been denied repeatedly- by those
who would have first-hand knowledge. Stanton, White, Brewer, Rugh
and Videnieks have consistently denied these allegations, and we
find no persuasive reason why all of these witnesses would
collectively lie.

The evidence fully supports the denial of William White that
any pressure was put on his office to convert the Inslaw case. The
evidence indicates that William White did not think particularly
well of Thomas Stanton or how Stanton performed his job. Thus, it
is far from clear that White would lie to protect Stanton.
Bankruptcy Judge Bason concluded that because White was now in
private practice. White would be willing to tailor his testimony to
avoid jeopardizing his relationship with the Trustee's Office.
Nothing we have discovered supports this speculation. It is not at
all likely. that White would, or in fact did, lie for such a reason.
Indeed, we believe that the opposite inference is more reasonable.
Because White was no longer in government, he was less susceptible
to pressure to tailor his testimony to suit DOJ's position.

In addition, we find little reason to suspect that Thomas
Stanton would want to obtain the conversion of the Inslaw case in
order to appease Brewer. As discussed elsewhere in this report, we
have found no evidence of a DOJ conspiracy to steal PROMIS from
Inslaw or to drive inslaw out of business. Moreover, there is
absolutely no evidence that senior DOJ officials ever considered a
conversion of Inslaw’s bankruptcy or directed Brewer to accomplish

- 227 -

such a conversion through Stanton. If upper-level DOJ officials
did not back or seek such a conversion effort {and we have found no
evidence that they did) , then there is no reason why Stanton would
agree to the alleged request by Brewer (whom Stanton did not know)
to have Inslaw converted, in other words, absent any evidence that
DOJ backed the conversion, there is no evidence to support
Bankruptcy Judge Bason's conclusion that Stanton agreed to seek the
conversion in order to curry favor with DOJ.

As we have noted elsewhere, any scheme to have Inslaw
converted to a chapter 7 liquidation bankruptcy would have been
doomed from the start. All the U.S. Trustee' s ‘Of fice could do to
seek conversion was to move the Bankruptcy Court- -that is.
Bankruptcy Judge Bason -- to convert the case. All involved
apparently agree, however, that it was obvious that the facts of
the inslaw case would not have supported a motion to convert, and
thus such a motion never would have been granted by Judge Bason or
any other bankruptcy judge. It is thus difficult to imagine why
DOJ and Stanton would scheme to convert Inslaw when such a scheme
was destined to fail.

Finally, whatever Stanton's motives may have been in wanting
Harry Jones to work on the case, it is not reasonable to conclude
that his object was the conversion of the Inslaw case. An attorney
of unquestioned integrity and expertise in bankruptcy matters would
hardly be the choice to execute a scheme that, if it could possibly
succeed, would at the very least require that the attorney file a
frivolous motion with the Bankruptcy Court.

- 228 -

we acknowledge that this is a troublesome issue. It is
troublesome because of the recantations of both Pasciuto and
Blackshear. But the recantations of those witnesses do not
convince us that there is any reason to credit their original
testimony. To the contrary, their recantations convince us that we
cannot rely upon any of their testimony to resolve this issue.

In short, we believe that the weight of the evidence does not
support the conclusion that there was a scheme by DOJ to convert
the Inslaw bankruptcy case to a chapter 7 liquidation.

2 . The Alleged Cover-up

The foregoing largely disposes of the allegations of a cover-
up. we have concluded that there is insufficient evidence of a
scheme to convert. We also have found insufficient evidence of a
cover-up of the apparently nonexistent scheme. Several related
matters, however, merit brief mention.

a. Blackshear 1 s Recantation

As noted above, the circumstances of Bankruptcy Judge

>

Blackshear' s recantation defy simple analysis. While reasonable
people can {and do) disagree about Blackshear 's motivations, we are
convinced that the response of DOJ employees to Blackshear' s
recantations was entirely proper.

James Garrity, then an Assistant U.S. Attorney in the Civil
Division of the U.S. Attorney's Office for the Southern District of
New York, and now a U.S. Bankruptcy Judge for the Southern District
of New York, represented Blackshear during the bankruptcy
proceedings in the independent Handling matter. Garrity

- 229 -

accompanied Blackshear to his first deposition. The next day,

Garrity received a call from DOJ attorney Dean Cooper, the trial

«

attorney defending the Independent Handling claims. Cooper told
Garrity that he believed Blackshear' s testimony was wrong and that
DOJ was concerned that something should be done to correct the
error. In his conversation with Garrity, however, Cooper did not
suggest what "correct" testimony would be. Garrity then spoke to
Blackshear, who also told Garrity that his testimony was wrong and
that he wished to correct it. Blackshear told Garrity that after
speaking with White he had become convinced that he had made a
mistake about the "conversion conversation." Garrity and
Blackshear then prepared the recantation affidavit, a copy of which
Garrity sent to Cooper.

These facts indicate conduct that was consistent with the good
faith effort expected of all attorneys to ensure that the record in
any lawsuit contains the truth. Likewise, because we have already
concluded that there is not sufficient evidence to conclude that
White's testimony or Blackshear' s recantation were untruthful, we
necessarily conclude that there is not sufficient evidence to find
that White suborned perjury by encouraging Blackshear to correct
his deposition testimony.

b. pasciuto's Termination

After the Independent Handling hearing, OPR conducted an
investigation of Pasciuto's conduct in connection with that matter.
During the investigation Pasciuto acknowledged that he exercised
very poor judgment in meeting with the Hamiltons in March 1987.

- 230 -

OPR found several of the charges against Pasciuto to be

unsupported. But after a careful review of the record in the

Independent Handling proceedings, and after interviewing those

involved in the hearing, OPR recommended that Pasciuto be

terminated. The OPR’s report states in part:

Our recommendation is based principally on his
decision to harm his superior, Mr. Stanton, in
any way he could, even to the extent of
providing what he acknowledged to be false
statements to the Hamiltons on March 17, 1987.

The OPR recommendation, therefore, was based upon Pasciuto 1 s

demonstrated disloyalty to his superior by providing false

information to the Hamiltons. Such conduct hardly qualifies

Pasciuto as a whistleblower.

After the OPR's report, of course, Pasciuto changed his story
once again, this time claiming that he told the Hamiltons the
truth. But this recantation essentially admitted that he
deliberately gave false testimony in the Independent Handling
proceeding. Even if Pasciuto' s recantation were true (and we do
not find sufficient evidence that it is) we think that the
admissions in Pasciuto' s new account of his conduct established his
unfitness for continued service in the position he then held.

Although Pasciuto might take some solace in characterizing
himself as a whistleblower, we do not believe the label is apt.
The conduct for which Pasciuto lost his job did not reveal the
truth, but instead concealed and obscured it. we find that the
DOJ's conduct in seeking and obtaining the termination of
Pasciuto 's employment was entirely appropriate.

- 231 -

X. DOJ'S RESPONSES TO CONGRESSIONAL INVESTIGATIONS

Criticism of DOJ has not been limited to its administration of
the PROMIS implementation contract and its litigation with Inslaw.
DOJ has also been criticized for its response to the Congressional
investigations of the Inslaw matter. Both the Permanent
Subcommittee on Investigations of the Senate Committee on
Governmental Affairs and the House Judiciary Committee issued
reports that were sharply critical of DOJ's responses to their
requests for information. The history of DOJ's responses to each
committee is detailed in their respective reports. We confirmed
some of the details of DOJ's responses, but except as noted below,
we accepted as accurate the factual statements contained in the
’ reports .

A. Allegation that DOJ's Objections Created Delays

Both committee reports criticize DOJ for creating delays by
objecting to various procedures and requests. The report of the
Senate Subcommittee charges, for example, that DOJ initially
objected to any Congressional investigation while the Inslaw
adversary proceeding was still in litigation. When the
Subcommittee rejected that request for delay, DOJ insisted that a
member of its inslaw litigation team attend any depositions of DOJ
employees. That condition resulted in a six to eight week delay,
apparently because all of DOJ's attorneys on the inslaw litigation
team were occupied with the preparation of DOJ's appellate brief in
the inslaw case when the Subcommittee wished to depose some DOJ

- 232 -

employees. Ultimately, those attorneys became available, and the
depositions proceeded.

Additional delay occurred when the Attorney General decided
that no depositions of DOJ employees would be taken unless daily
copies of transcripts were provided to DOJ. Ultimately, that
decision was reversed and the depositions proceeded.

The House Judiciary Committee experienced similar delays.
Interviews of DOJ employees by the Committee were delayed by the
Attorney General's initial insistence that a DOJ attorney be
present at any such interview. That requirement was dropped after
the Committee protested. Then, access to DOJ files was delayed,
reportedly for several months, while the Committee and DOJ
negotiated about the confidentiality of certain documents. After
that issue was resolved, DOJ refused the Committee access to
documents that DOJ considered to be protected by the work-product
doctrine and the attorney -client privilege. After a Committee
hearing on that issue, the Attorney General granted full access to
all its Inslaw- related documents.

The Senate PSI Staff characterized DOJ's "lack .of cooperation"
as "hamper [ing] " a full, free and timely investigation. The House
Committee reported that DOJ attempted to "thwart" the Committee's
inquiry. Despite these characterizations, there is no allegation
{or basis for suggesting, so far as we are aware) that the delays
caused by DOJ's objections constituted a criminal obstruction or
attempt to obstruct Congress.

- 233 -

Although it could be argued that some of DOJ's objections were
expansive, they were by no means frivolous. Both Congressional
inquiries touched on matters that were the subject of pending
litigation. Many of the documents requested were for this reason
particularly sensitive, and DOJ could be justly criticized if it
failed to take precautions against further disclosure.

With perfect hindsight, it would be easy to conclude that DOJ
acted improvidently in asserting objections that it later withdrew.
Those objections caused delays and increased the committees'
frustration with and skepticism about DOJ's candor. The delays and
frustration apparently fueled the suspicions of at least the House
Committee investigators, and generated hostility between DOJ and
those investigators.

DOJ arguably derived some benefit from its objections and the
consequent delays. At least some of the work and consequent
criticism of the committees was delayed until after the Court of
Appeals reversed the decision of the bankruptcy court. Also, DOJ
negotiated some concessions from the committees as a result of its
ob j ections .

Whether any of these benefits outweigh the "cost” of DOJ's
perceived lack of cooperation with the committees is, for the most
part, a political question, not a legal one. It is not our role to
provide political advice concerning these subjects, and we defer on
such issues to those with appropriate expertise.

We note, however, the irony of the House Committee's criticism
of DOJ for delaying access to documents. We have tried for months

- 234 -

to obtain access to the documents and information the House
Committee compiled during its investigation of this matter. To
date, we have received little outside of the published report and
the public hearings. Although the House Committee has urged that
further investigation be conducted into the "inslaw Affair, " it has
not provided us or DOJ with the documents and information that it
contends warrant further investigation. We do not conclude,
however, that the Committee is attempting or has attempted to
thwart our investigation. To the contrary, we recognize that the
Committee has legitimate privacy and institutional concerns
regarding its documents and the confidentiality of its sources. We
respect the Committee's need to delay our access to its documents
so that it has time to make a reasoned decision on our requests.
Delay is an unfortunate, but perhaps inevitable, consequence of
having coordinate branches of government attempt to investigate the
same subjects. We note that we encountered similar delays in
obtaining materials from the Senate PSI investigation. Although
the Senate PSI's members, staff and counsel were extremely
courteous and helpful, it took several months before the
Subcommittee was able to authorize disclosure of their
investigation materials. We, of course, thank the Senate and its
staff for their aid and cooperation with our investigation.

B. Allegation that DOJ violated Conflict of Interest
Principles

Although the Senate Subcommi ttee ' s staff was clearly concerned
about the delays that DOJ's apparent uncooperativeness created, it
leveled its most serious criticism at DOJ for assigning a DOJ

- 235 -

attorney to represent both DOJ and Department employees in an
investigation that focused on DOJ itself. The Subcommittee
reported that it believed that this arrangement violated principles
of conflict of interest.

The Subcommittee apparently concluded that Bankruptcy Judge
Bason's suggestions that DOJ committed crimes, whether correct or
not, created such an inherent conflict of interest between DOJ and
its employees that DOJ could not represent any employees in the
Congressional investigation. We disagree.

The Bankruptcy Court's findings created a potential conflict
of interest only if those findings were accepted as true, or if the
employee to be represented believed them to be true. If those
findings were incorrect, and the employee had no information or
belief to the contrary, then there was no inherent conflict. DOJ
attorneys could ethically represent both the interests of DOJ and
the interests of the employees, whose actions the attorneys
believed to have been consistent with the legitimate interests of
DOJ.

The problem DOJ faced arose from the fact that the Bankruptcy
Court's findings created an appearance of wrongdoing by DOJ. That
appearance raised the further appearance of potential conflict
between DOJ and its employees, especially those employees that the
Bankruptcy Court believed to be involved in wrongdoing. An
appearance piled upon an appearance, however, does not make a
conflict. Although it might have been prudent for DOJ to provide
outside counsel to represent its employees (and thereby avoid even

- 236 -

the appearance of a conflict of interest) , it was not in our view
ethically or legally required to do so.

Rather, the obligation of DOJ and its lawyers was to determine
whether any of the employees who were to be questioned by the
Subcommittee had any interest {or information) that differed from
the interests of DOJ, such that the judgment of a DOJ attorney
representing both of them might be adversely affected. According
to the statements made by the Assistant Attorney General for the
Civil Division at a Senate hearing, DOJ evaluated this question and
concluded that there was no conflict. This appears to us to have
been an appropriate approach to the problem. In view of our
conclusions regarding the allegations against DOJ and the
Bankruptcy court's findings, we concur with the conclusion that
there was no conflict.

c. Question of Whether DOJ Destroyed Documents.

The most serious suggestion of wrongdoing by either
Congressional committee is not presented in the form of an explicit
accusation. It is simply stated as a question. Specifically,
during its investigation, the House Committee learned from DOJ that
certain requested documents -- compi led by Sandra Spooner, Deputy
Director of the Commercial Litigation Branch, Civil Division- -were
missing. The Committee reported this fact and also reported that
"[biased on the numbering system used by DOJ, ... it appear [ed]
that numerous additional documents [were] missing ." 93 The

93 We asked the Committee to clarify this conclusion because we
have not been able to determine from the document -numbering system

{continued. . . )

- 237 -

Committee noted that, in light of the allegations of criminal
conspiracy against high level DOJ officials, some people will
question whether the missing documents may have been destroyed.
The Committee concluded by noting that the question of unauthorized
destruction of documents also arose in the context of a former DOJ
employee who alleged that Department employees illegally destroyed
documents relating to the Inslaw case by shredding them . 94 Thus,
without explicitly accusing anyone of illegally destroying
documents, the Committee raised the possibility of just such
illegal conduct.

We investigated this suggestion and found no evidence that
anyone intentionally destroyed any documents that were requested by
Congress. The circumstances surrounding the missing file and its
reconstruction persuade us that it was lost and not destroyed.

Significantly, it was Sandra Spooner herself who discovered
and reported that a file was missing. The missing file was a
binder of privileged documents that she had compiled from her trial
materials. All DOJ attorneys who were involved in the inslaw
litigation compiled such files when the House Committee first
requested access to DOJ litigation documents.

Initially, DOJ agreed to provide access only to its non-
privileged documents. As a result, DOJ attorneys reviewed their

93 ( . . . continued)

that any documents were missing. The Committee has not yet
responded to our request.

94 As noted elsewhere in our report, we found no evidence to
support the allegation that DOJ employees had shredded Inslaw
related documents.

- 238 -

files and removed all privileged documents, replacing each with a
single sheet of yellow paper that bore a number corresponding to a
Vaughn - type index for the privileged documents. Both the
privileged and non -privileged documents were placed in an unlocked
cabinet in an unlocked storage room on the same floor as Spooner's
office in the Todd Building. Any person who worked on that floor
had access to the file cabinet.

The Committee's investigators came to that floor to review the
documents. The non -privileged documents were made available to the
Committee's investigators in a conference room across the hall from
the area where the documents were stored. The investigators were
escorted to that room and files of documents were brought to them.
No one from DOJ was present in the conference room with them, on
occasion, one of the investigators accompanied Spooner to the
storage room across the hall to retrieve more files. So far as
Spooner is aware, the investigators never went to the storage room
unaccompanied.

while reviewing the non -privileged documents, the
investigators concluded that they would need to see the privileged
documents as well. A second agreement was reached between DOJ and
the House Committee whereby DOJ granted access to its privileged
documents. Again, the investigators went to the office of the
Commercial Litigation Branch to review the documents.

Typically, Spooner pulled files for the investigators' review
a day before they arrived. For the first few days of her review,
she pulled files other than her own. The review proceeded without

- 239 -

incident. When she went to the file cabinets to pull her own
privileged files, she noticed that one of four binders of her

t

documents was missing. Spooner could not recall when she last used
this file before discovering that it was missing, although she was
certain that she used it several times after its creation.

Upon discovering that the binder was missing, Spooner directed
her secretary to try to locate the file. When it could not be
located, Spooner sent out an office-wide notice directing all
attorneys who worked on the Inslaw case to search their files and
desks for the missing file. When the Committee investigators next
arrived, Spooner advised them that one of her files was missing,
and she provided them with other files of privileged documents.

Later, Spooner searched her house and car. She notified her
supervisor and the Office of Legislative Affairs about the missing
file. A look-a-like file was created, and every employee on the
floor was required to examine the look-a-like file, search his or
her office for the real file, and report the results of the search
to a lead secretary.

Thereafter, DOJ management analysts searched the offices,
including desks and file cabinets, on Spooner's floor for the
missing file. The analysts then went to the Archive Center in
Rockville, Maryland, and searched the boxes of files of cases that
had recently been closed by any attorney in Spooner’s office who
might have accidentally picked up the missing file. Despite these
efforts, the file has not been found.

- 240 -

It has, however, been largely reconstructed. Spooner knew
from the Vaughn - type index and from memory that the missing file
contained some trial notes, internal memos, and other materials.
The memos and some of the other materials were simply duplicate
copies of documents contained in other attorneys' files. As a
result, much of the missing file was reproduced and made available
to the Committee.

The Committee does not allege in its report that anyone
intentionally destroyed the file. There is a suggestion,
nevertheless, that the file may have been destroyed because it
contained documents that implicated DOJ officials in a criminal
conspiracy relating to inslaw.

Such suspicion strikes us as far-fetched. First, there are no
suspects. Spooner surely is not a suspect. She is the one who
initially preserved, compiled and indexed the documents. If she
had been intent upon destroying unfavorable information, she could
have done so without arousing any suspicion simply by destroying
the documents before they were bound and indexed. Moreover,
although her announcement of the loss of the file might arguably be
part of an elaborate cover-up, we think it more likely that, had
she actually destroyed the file, she would have said nothing and
waited to see if the investigators noticed that it was missing. In
addition, Spooner appeared to us to be extremely credible and
genuinely concerned about the loss of the file and the consequences
of that loss. We credit her version of the event. Incidentally,
Spooner herself believes the file was misplaced, not stolen.

- 241 -

we found no evidence to implicate anyone else. Many people
had some access to the unlocked storage room in which the missing
file had been located. Even the Committee investigators had
limited access to the storage room and therefore the missing file.
By no means do we suggest that one of the investigators stole the
file. We found no evidence to support any such suggestion.
Instead, our point is to underscore the near impossibility of
prosecuting anyone for destroying the Spooner file based on
circumstantial evidence.

D. Allegation that DOJ Interfered With the House
Committee's interview of Riconosciuto

The House Committee also reported that DOJ interfered with its
efforts to obtain information from Michael Riconosciuto.
Specifically, after the Committee had arranged to interview
Riconosciuto at a county jail , 95 DOJ informed the Committee that
the interview could only be conducted at the U.S. Courthouse in
Seattle. Thereafter, the Committee investigators asked the
Assistant United States Attorney who was prosecuting Riconosciuto
to provide a sworn statement that the interview would not be
monitored or recorded by DOJ. According to the House Committee's
report, the AUSA declined, stating that it was not DOJ policy to
record private conversations between clients and their attorneys.

95 Riconosciuto was in federal custody, but was housed at a
county jail pursuant to a contract between the jail and the U.S.
Marshal's Service. •

- 242 -

and he considered the Committee’s interview of Riconosciuto to be

of the same category. 96
«

The Committee also reported that DOJ refused to allow the
Committee access to DOJ's investigative files on Riconosciuto or to
interview the agents who arrested him. It stated that DOJ used as
a justification for these refusals the fact that the investigation
of Riconosciuto was on- going. It appears to us that the
Committee's report may be slightly inaccurate on this point, when
the Committee investigators first visited Riconosciuto it was just
days after Riconosciuto ' s arrest. It may well be that a request
made at that time for the investigative fil£s was denied. The AUSA
who tried the case told us, however, that shortly after he was
assigned the case (in late summer of 1991) he called one of the
Committee's investigators and offered to give the Committee
complete access to all files on the Riconosciuto investigation.
The AUSA told us that nobody from the Committee ever followed up on
this offer, which was made over a year before the House Committee
issued its report.

We did not attempt to resolve this conflict. The underlying
controversy, such as it is, appears largely to raise questions of
comity. The complaints of the committee investigators raise

96 The prosecutor to whom this request was made told us that he
found the Committee's request for a sworn statement offensive. We
are inclined to agree, since the investigators were, in effect,
asking the prosecutor to give a written affirmation that he would
not commit a felony. Yet, the mere fact that Committee
investigators thought they needed such an assurance reveals their
skepticism about the integrity of DOJ attorneys and the depth to
which the relationship between DOJ and the Committee had fallen.

- 243 -

questions of criminal law only insofar as the Committee Report
insinuates that DOJ arrested Riconosciuto, threatened to monitor
his interview, and refused to disclose investigative information in
an effort to muzzle Riconosciuto and cover-up DOJ's involvement in
the theft and sale of Inslaw's software. We investigated these
insinuations and, as is reported in our findings and conclusions
regarding Riconosciuto and the alleged conspiracy with Earl Brian
(Part v.A.l above), we found absolutely no evidence to support the
claim that there was a connection between the prosecution of
Riconosciuto and his statements to the House Committee.

XI. REMAINING ALLEGATIONS

Our investigation has not comp rehens ively covered all of the
allegations Inslaw has made during the course of its disputes with
the DOJ. In addition to the allegations described above, about
which we have reached and stated conclusions, there are other
allegations as to which we conducted only preliminary
investigations. For the reasons discussed below, based on what we
found during our preliminary review of these remaining matters, we
do not believe further investigation of these matters is likely to
uncover substantial evidence of criminal or other intentional
wrongdoing by DOJ.

A. Allegations Concerning Dickstein, Shapiro & Morin

While the adversary proceedings against the DOJ were pending,
Inslaw filed an unusual objection to the application for fees filed
by its former counsel, Dickstein, Shapiro & Morin. The Dickstein,
Shapiro firm had originally represented Inslaw in prosecuting its

- 244 -

adversary complaint against DOJ. I.ee Ratiner was the Dicks tein
Shapiro partner in charge of the matter. In its objection to
Dickstein, Shapiro's application. Inslaw charged that the firm,
because of pressure by DOJ, forced Ratiner out of the firm and
effectively abandoned Inslaw. Bankruptcy Judge James F. Schneider
found there was no credible evidence to support Inslaw's charge.
The Bankruptcy Court concluded that inslaw' s allegations of
wrongdoing were "built upon supposition, suspicion and
uncorroborated hearsay, all of which [are] unworthy of belief." In
re Inslaw , 97 B.R. 685 (Bankr. Ct D.D.C. 1989). The Senate
Permanent Subcommittee on Investigations also investigated Inslaw's
claim. The Senate Staff also found no proof of any DOJ pressure on
the Dickstein, Shapiro firm which in any way affected the firm's
representation of Inslaw.

In the light of the conclusions reached by agencies of both
the judicial and the legislative branches of government, we saw no
reason to investigate the Dickstein, Shapiro matter any further and
we determined early in the course of our investigation not to
independently investigate these allegations. More recently, Ari
Ben-Menashe has published a book in which he claims to have seen
evidence suggesting that the Dickstein, Shapiro firm was to be paid
$600, 000. by Hadron or Earl Brian in order to remove Ratiner from
the firm. in light of our conclusions about Ben-Menashe ' s
testimony noted elsewhere in this report, we see no reason to
reopen our investigation because of this implausible claim.

- 245 -

B. The Death of Joseph Daniel Casolaro

As part of our inquiry, we reviewed the investigation
undertaken by local authorities concerning the death of Joseph
Daniel Casolaro. Casolaro was a self-styled free-lance au-
thor/investigative reporter investigating claims made by Inslaw.
According to second-hand accounts, Casolaro was reportedly
investigating suspected links between the Inslaw controversy and
what Casolaro called "the Octopus," supposedly a secret intelli-
gence organization with links to international arms -dealing, covert
operations, and, perhaps, organized crime. Casolaro had told
several persons he planned to meet a source in Martinsburg, west
Virginia. Casolaro 's body was found in the bathroom of his hotel
room at the Sheraton Inn in Martinsburg on August 10, 1991.
Casolaro died in the bathtub. Both wrists were slashed several
times with a razor blade. His death was ruled a suicide by local
authorities .

Casolaro' s death has attracted a great deal of attention in
the press, at least in part because of the threat posed whenever a
reporter investigating a story is found dead under questionable
circumstances. We have reviewed the investigation of Casolaro 's
death to assure ourselves that no improper influences were brought
to bear on the investigation and that the conclusions of the
investigation were supported by substantial evidence.

First, we have concluded that there is no evidence suggesting
that DOJ exerted any influence on the investigation conducted by
the local West Virginia authorities concerning Casolaro 's death.

- 246 -

A private citizen's death, whether a suicide or a murder, is
outside the normal jurisdiction of the federal government.
Instead, it is a state or local matter. Accordingly, we find
nothing unusual in the fact that DOJ did not undertake to
investigate Casolaro's death. We have found no evidence of any DOJ
involvement in the investigation into the circumstances of
Casolaro's death, beyond the normal and expected assistance law
enforcement agencies typically provide one another. Specifically,
aside from assistance and information sharing between the local
authorities and the regional FBI office, we have found no evidence
of any federal government influence on the local investigation.

Second, the physical evidence in Casolaro's hotel room
strongly supports the conclusion of the local authorities that the
death was a suicide:

There was no sign of forced entry to the hotel
room;

There was no evidence that a struggle occurred;

A note was found in Casolaro’s room. The note
stated: "To my loved ones, Please forgive me --

most especially my son -- and be understanding.
God will let me in."

There were no indications that the personal effects
found in the hotel room had been disturbed;

Although there was extensive pools of blood and
blood stains throughout the room in which the body
was found, there was no evidence, such as foot
prints, that others were present when Casolaro's
wrists were slashed.

Third, subsequent tests and analyses of the physical evidence

corroborate the conclusion of suicide:

Handwriting analysis of the suicide note confirmed
that it was written by Casolaro;

- 247 -

Fingerprint analysis of the bathroom and the pad of
paper in which the suicide note was found revealed
the prints of Casolaro and no others except for a
single print on the bottom of an ash tray. The
existence of Casolaro’ s prints, and the absence of
others, support the conclusion that Casolaro was
alone and tend to negate the possibility that
someone "wiped down" the premises;

Hair and fiber analyses conducted on items from the
scene revealed no evidence that others were present
in the hotel room;

An analysis of the blood stains and related physi-
cal evidence conducted by Dr. Lee of the Connect-
icut State Police Forensic Science Laboratory
concluded that the evidence was consistent with a
suicide.

The autopsy found that the cause of death was the
hemorrhage from the multiple wounds to the wrists.

No evidence from the autopsy or subsequent tests of
blood and urine revealed any evidence that Casolaro
was unconscious or debilitated when his wrists were
cut.

The autopsy revealed no contusions, lacerations, or
trauma to the body of the kind that one might
expect were Casolaro involved in a struggle.

Fourth, subsequent police interviews of those with knowledge
of Casolaro’ s activities during the two days preceding his death
failed to develop any substantial evidence that any other person
had the means or opportunity to murder Casolaro.

Fifth, there was ample reason to believe Casolaro had a motive
to commit suicide. He had been for all practical purposes
unemployed for months. He was dependent upon financial assistance
from his family to support himself. The balloon mortgage on his
home was soon to be due. Moreover, shortly before his death he was
told by a prospective publisher that the publisher would not
advance him any monies on his proposed book about the "Octopus."

- 248 -

The foregoing facts persuade us that Mr. Casolaro's death was
fully and fairly investigated and that the conclusion of the local
authorities that his death was a suicide was amply supported by the
facts. Indeed, in an independent review of the autopsy James E.
Starr, Professor of Law and Forensic Sciences at George Washington
University, reportedly has arrived at the same opinion as that
expressed in this report. Several criticisms that have been made
of the investigation do not alter our opinion that Mr. Casolaro's
death was correctly determined to be a suicide.

It has been suggested that "immediately following the
discovery of the body, the room was not sealed by Martinsburg
authorities potentially allowing for the contamination of the
possible crime scene." Our review of the Martinsburg Police
Department's report does not confirm this allegation. On the
contrary, upon the Police Department's arrival at the scene, the
hotel room was examined, photographs were taken, and the coroner
was called and investigated the scene. No evidence supports the
speculation that the scene was subsequently contaminated after the
body was released by the coroner to a local funeral home. On the
contrary, the results of the fingerprint evidence collected when
the hotel room was dusted for fingerprints on August 12 suggests
that there was no contamination.

It has also been suggested that there was undue delay in
notifying Casolaro's next-of-kin following the discovery of his
body and that, in the meantime, Casolaro's body was embalmed,
possibly limiting, the effectiveness of the autopsies or toxico-
logical examinations. There was some delay in notifying Casolaro's

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next-of-kin. Martinsburg authorities requested the assistance of
the Fairfax County, Virginia, Police Department in order to
personally notify next-of-kin. Next-of-kin, however, were not at
home when visited by the Fairfax authorities and apparently did not
respond to a request that they call. In the meantime Casolaro's
body was embalmed. The medical examiner, however, was of the
opinion that the embalming did not impair his ability to perform
the autopsy and to perform necessary tests.

Finally, it has been suggested that the Martinsburg author-
ities failed to give appropriate weight to various suspicions that
had been voiced by several people, including Casolaro's family
members and friends, that various "sources" whom Casolaro had been
interviewing might have been responsible for his death. The
Martinsburg Police did receive a number of suggestions, of various
quality and specificity, that Casolaro conceivably could have been
killed because of his investigation into the Inslaw matter and
other allegedly related subjects. Aside from wholly speculative
possibilities, no credible evidence suggested that any of
Casolaro's "sources" played any role in his death. Substantial
physical evidence supported the conclusion of suicide. We do not
believe the circumstances warrant an exhaustive investigation to
exclude every conceivable possibility that any of the several
potential "sources" suggested as potential participants in a hypo-
thetical murder plot did not in fact murder Casolaro.

C. The Alleged Sham Contract Disputes

During the pendency of the adversary proceedings initiated by
Inslaw in the Bankruptcy Court and throughout most of our

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investigation, various disputes and related claims arising under
the implementation contract were also pending before the Department
of Transportation Board of Contract Appeals ( "DOTBGA" ) . (As
previously noted, the contract disputes were presented to dotbCA
pursuant to the provisions of the Contract Disputes Act because DOJ
has not established its own board.) The disputes between inslaw
and DOJ before DOTBCA concerned Inslaw's claims for allegedly
reimbursable costs (computer center costs, other direct costs,
"out-of -scope" work, overhead and fringe benefits), additional
fees, and amounts due pursuant to DOJ’s termination for convenience
of the word processing portion of the implementation contract. DOJ
also filed claims in the DOTBCA proceedings to recover certain
overpayments allegedly made to Inslaw under the contract. Most of
the issues before DOTBCA were not passed upon or decided as part of
the adversary proceedings before the Bankruptcy Court. Indeed,
prior to the hearing on Inslaw’s adversary complaint. Bankruptcy
Judge Bason entered an order specifically excluding from the trial
before him issues such as the controversy over the computer center
charges, the withholding of payments by DOJ, and the termination of
the word processing portion of the contract. Neither the Senate
PSl's Staff Study nor the House Committee Report made any findings
on the merits of the claims before DOTBCA.

Similarly, we did not examine the merits of the claims before
the DOTBCA in great depth. The issues before DOTBCA touched only
indirectly upon the allegations of conspiracy and other criminal
misconduct that were the focus of our investigation. Moreover, we
had anticipated that DOTBCA would soon hear and determine the

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parties' claims under the implementation contract. The hearing on
the merits of the parties' claims was scheduled for the autumn of
1992. in October 1992, however. Inslaw unilaterally moved to
withdraw its claims before DOTBCA. In a lengthy eighteen page
brief. Inslaw claimed to be unable to afford counsel to prosecute
its claims. The bulk of Inslaw's brief, however, took exception to
several adverse, pre-hearing rulings of DOTBCA and reargued the
merits of some of the same claims Inslaw had previously made before
the Bankruptcy court. without specifically addressing the
assertions made in Inslaw's motion to withdraw, DOTBCA, without DOJ
objection, granted the motion. Accordingly, Inslaw's appeals
before the Board were dismissed with prejudice on November 9,
1992. 97

In light of the final disposition of Inslaw's claims by
DOTBCA, we did not believe it was appropriate to reexamine the
parties' monetary claims presented to DOTBCA or to attempt to
determine the esoteric government cost accounting issues that were
the principal subjects of the DOTBCA proceedings. It is
unfortunate that Inslaw chose not to pursue its claims before
DOTBCA. Almost from the beginning of the disputes between DOJ and
Inslaw, Inslaw has claimed that DOJ, because of self-interest,
improper personal influence, or some other extraneous factor, has
been unable to fully and fairly determine the merits of Inslaw's

97 A1 though DOJ also had filed claims before DOTBCA, DOTBCA
found that DOJ's claims had been limited to "set-off status, that
is, they [could] only be used as set offs against any amount which
the Board might find to be owing to Inslaw." In light of this
ruling, the allowance of inslaw' s motion to withdraw its claims
necessarily disposed of all claims before the Board.

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claims, whether they be contractual, criminal or otherwise. When
offered the opportunity to have some of its claims determined by
another department that presumably would be free of such
influences, Inslaw gave up its right to a full hearing and a
determination of its claims.

Although there was no hearing on the merits of the parties'
claims, a disposition with prejudice is nevertheless a final,
binding disposition. Accordingly, as a civil matter inslaw is
almost certainly not entitled to retry the merits of its contract
appeals.

We did, however, consider the parties' claims before DOTBCA to
the extent we believed necessary to determine whether the DOJ's
positions and actions leading up to the parties' disputes were so
clearly baseless or without foundation as to give rise to a
reasonable inference that the origins of the disputes must have
been motivated by improper purpose and a desire to force inslaw
into bankruptcy. In other words, were these "sham contract
disputes" that were deliberately engineered by DOJ in order to
force Inslaw into bankruptcy and to surrender its rights to the
PROMIS software? Or, instead, did legitimate differences of
opinion concerning the parties* rights give rise to the parties'
contract disputes? Our preliminary review of the parties filings
before DOTBCA and related discovery and documentary evidence leads
us to believe that the latter conclusion is the correct one.

During 1983 DOJ suspended payment to Inslaw of certain
invoices for computer center costs . As part of the implementation
project, Ihs law provided temporary computer services directly to

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U.S. Attorneys’ . offices until their own PROMIS systems were
installed. This service required that Inslaw provide access to its
computers at its own computer center. Pursuant to the
implementation contract, inslaw billed DOJ for these services. In
April 1983, Inslaw requested a modification of the contract to
allow increased time sharing costs, which inslaw attributed to
higher than projected usage by the U.S. Attorneys' offices. In
reviewing this request, the contracting officer became concerned,
not just about a potential cost overrun, but whether inslaw's cost
accounting for these services overcharged the government. This
concern ultimately led to the partial suspension of payment of
inslaw' s invoices for computer center services pending an audit of
Inslaw's costs.

Whether the contract permitted suspension of payments of
invoices has been questioned. Regardless of whether contractual
provisions permitted suspension of payments, however, the issue
relevant to our inquiry is the purpose and motive of the suspension
of payments. The evidence we reviewed indicates that videnieks
suspended payment of invoices for computer center services because
of genuine concerns about potential cost overruns that were brought
to his attention by Inslaw's request for a contract modification.
Inslaw's request led to a technical analysis by Jack Rugh. Rugh's
analysis clearly raised the prospect of substantial overcharges
having been made by Inslaw. Based on Rugh's analysis, videnieks
immediately requested audit staff assistance to investigate the
computer center costs. The audit staff recommended that Videnieks

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consider suspending payment of invoices relating to computer center
costs .

It is telling that when the audit staff eventually completed
its audit of Inslaw's computer center costs for the relevant period
of time, fiscal year 1983, the staff concluded that Inslaw had
overcharged the government more than $400,000. Perhaps more
significant was the audit staff's conclusion that inslaw's cost
records were essentially unauditable and its recommendation that
the contracting officer deny all of Inslaw’s claimed computer costs
because its method of accounting for computer center costs was so
unreliable, indeed, Inslaw appears to have changed its system of
accounting for computer costs for subsequent fiscal years.

After the contracting officer’s initial decision to suspend
payment of computer center costs, DOJ in negotiations with Inslaw's
counsel agreed to and did modify its suspension policy and released
some funds in order to avoid undue hardship upon Inslaw . This
conduct, in our opinion, is consistent with a good faith attempt to
protect the government from potentially serious cost overruns and
overcharges, and belies inslaw's claim of a plan to force it into
bankruptcy. The circumstances would not seem to support a finding
of any motive or desire upon the part of any DOJ employee to
inflict harm upon inslaw or to force it into bankruptcy.

There were similar cost accounting disputes between the
parties relating to other cost accounting issues and relating to
other fiscal years. The net result of these controversies was that
by the time that the implementation contract ended in 1985, Inslaw
was claiming it was entitled to millions of dollars from DOJ and

- 255 -

DOJ was claiming that it was entitled to a similar amount by way of
a counterclaim. The events leading up to many of these disputes
are long and many of the issues complex, but in every significant
case DOJ's claims were backed up, not just by the opinions of the
EOUSA or the contracting officer, but also by reports of DOJ audit
staff. Moreover, the Defense Contract Audit Agency ("DCAA"), an
agency independent of DOJ, subsequently audited Inslaw’s books and
records for the bulk of the contract period and concluded that
Inslaw was overpaid approximately $590,000. Even if the DCAA's
conclusion is incorrect, we believe it provides considerable weight
to our conclusion that whatever the merits of the parties’ contract
disputes, the government’s positions about overcharging and cost
overruns were founded upon legitimate, good faith concerns and the
desire to protect the government's interests, and not out of the
desire to bankrupt Inslaw or to force its liquidation.

D. Response Of DOJ To Claims of Brewer Bias

In May of 1982 one of Inslaw's outside attorneys complained to
DOJ officials that Brewer was biased against Inslaw and William
Hamilton, and that this bias was causing Brewer to treat Inslaw
unfairly in connection with the EOUSA contract. According to
Inslaw, Hamilton had fired Brewer from his job as General Counsel
for the institute for Law and Social Research, Inslaw's
predecessor, and Brewer’s actions in connection with the contract
were designed to extract a measure of revenge against Hamilton.
Between 1982 and 1985, Inslaw repeated this complaint to various
DOJ officials on several occasions, usually when questioning one of
the decisions of Brewer or the contracting officer. Bankruptcy

- 256 -

Judge Bason found that DOJ "ignored" Inslaw's claims of bias, and
suggested that it did so because Deputy Attorney General Jensen had
a "previously developed negative attitude about PROMIS."

OPR thoroughly investigated this allegation during 1988 and
1989. In its March 31, 1989 report, OPR concluded that there was
no misconduct by any past or present DOJ employees in connection
with their responses to Inslaw's claims of bias. We found OPR's
conclusions to be both reasonable and consistent with the evidence
we obtained and reviewed in connection with our investigation of
other allegations. Therefore, we have not independently
interviewed all of the various witnesses implicated by this
allegation. We feel it appropriate, however, to mention several
items that came to our attention during our review.

To begin with, we agree with the conclusion reached by the
Senate Subcommittee Staff, that in hiring a former Inslaw employee
to be the Project Manager of the PROMIS project DOJ was not
sufficiently attentive to the potential for the appearance of a
conflict of interest. Bankruptcy Judge Bason felt that "such prior
employment would generally lead the former employee either to favor
or disfavor the former employer, thus preventing that person from
being impartial in the discharge of his duties." While reasonable
people could disagree whether the potential conflict would, as
Bason assumed, always become an actual conflict, it appears to us
that the appearance of such a conflict should have weighed against

- 257 -

hiring an individual to administer a project where his former
employer is the primary vendor to the project . 96

That said, however, there is no evidence that DOJ knew or
should have known, prior to hiring Brewer as Project Manager, that
there was any acrimony between Brewer and Inslaw. To the contrary,
the evidence presented during the Inslaw adversary proceeding
indicates that DOJ’s inquiry to Inslaw about Brewer produced no
hint of trouble between Brewer and Hamilton. EOUSA Deputy Director
Lawrence McWhorter testified that he called William Hamilton to ask
about Brewer, and that Hamilton told him he would have no problem
working with Brewer. Hamilton testified that he did not remember
such a call, btft that he was aware that one of Inslaw’s senior
officers, John Gizzarelli, remembered Hamilton telling him about
such a call at about the time DOJ hired Brewer. Likewise, Inslaw's
former General Counsel, John Kelley, testified at trial that
Gizzarelli told him that prior to Brewer's hiring by DOJ Hamilton
had told DOJ that inslaw would have no problem with Brewer. In
other words, Hamilton did not deny at trial that McWhorter had
called him, and the testimony of at least three people indicated
that such a call did take place. Yet, Bankruptcy Judge Bason found
that McWhorter did not call Inslaw to ask about Brewer. We believe

98 We do not say that no reasonable person could have hired
Brewer for the position. DOJ officials have stated that they felt
that Brewer's prior experience with the institute was a positive
factor, giving Brewer valuable knowledge of both PROMIS and Inslaw
that could only help in administering the project. Moreover, the
six year time lag between Brewer's hiring and his work at the
Institute, along with inslaw' s initial lack of objection to Brewer,
could be viewed as factors in favor of hiring Brewer. Our point is
that DOJ appears to have been insensitive to the countervailing
appearance* of a potential conflict of interest.

- 258 -

this finding was not only plainly erroneous, but indicative of the
degree to which Bankruptcy judge Bason was willing to reject any
evidence that did not support his theory of bias and revenge.

In any event, it is undisputed that prior to May 1982 Inslaw
did not claim to DOJ that Brewer had been fired. Nonetheless,
Bankruptcy Judge Bason found that, faced with inslaw's allegations
of bias, it was unreasonable for DOJ officials to accept Brewer's
claim that he was not fired. Based on our preliminary review, we
do not share that opinion.

We found little evidence to support the image of the
acrimonious departure that Bankruptcy Judge Bason's written opinion
conjures up. Indeed, we found a surprising degree of agreement in
the testimony of Brewer and Hamilton about the circumstances of
Brewer's departure. Both said that they were of the shared opinion
that Brewer was not fitting in well at the Institute," and both
agreed that Brewer was given a long period of time in which to find
a new job. While their testimony differed slightly as to who first
decided that Brewer should leave, both agreed that the departure
was not acrimonious. Perhaps it did not occur to Bankruptcy Judge
Bason that in many cases the termination of an employee's
employment, even in cases where it was suggested that the employee
should look for a different position, is not an occasion for ill
will, or feelings of hatred, and not necessarily viewed as a

"william Hamilton testified that he told Brewer in April or
May of 1975 that he did not think "the fit [between the Institute
and Brewer] was a good one." Even according to Hamilton, however.
Brewer said at that meeting that "he did not think the fit was a
good one from his perspective either," and that "he desired to
leave the Institute as well at that point."

- 259 -

"firing". In many cases, such as the case here, it is ambiguous
whether the departure was voluntary or involuntary.

In addition, our investigation found little evidence of the
deep- seeded desire for revenge that Bankruptcy Judge Bason found to
be the explanation for most of Brewer's conduct. 100 in our
discussions with Brewer he made no effort to hide his views about
Hamilton and Inslaw. Brewer candidly told us that early during the
implementation contract he reached the conclusion that Hamilton was
dishonest and that Inslaw did not intend to live up to some of its
obligations under the contract. As we indicated earlier, we
believe this view caused Brewer and others to be aggressive in
asserting what they felt were the government's legitimate rights
under the contract. But it also appears to us that Brewer’s
opinions of Hamilton were based primarily on Hamilton’s conduct in
connection with the 1981 BJS contract and the 1982 EOUSA contract
and not due to the circumstances of his leaving the Institute six
years earlier. Brewer referred to numerous incidents and reasons,
all unrelated to his departure from the institute, that formed the
basis of his opinions of Hamilton. Brewer's credible explanation
of his conduct, along with Hamilton's own description of an
amicable departure, support the conclusion of DOJ officials that
Brewer was not biased against Hamilton.

100 Because we determined {for the reasons discussed in the
previous sections) that Brewer and others at DOJ did not attempt to
steal Inslaw's software or destroy Inslaw, we did not dwell
extensively on Brewer's personal feelings about Hamilton. We did
interview Brewer and others about the matter, however.

- 260 -

It is also important to note the context in which inslaw' s
claims about Brewer's "firing" arose. This charge was usually made
in connection with Inslaw's appeal of one of Brewer's (or
videnieks') decisions concerning the administration of the PROMIS
implementation contract, or during discussions to attempt to reach
a negotiated settlement of the parties' disputes. The charge was
made in such a way to suggest that the DOJ's position was unfair
and arbitrary. in other words, the charge was made to color the
motives for a DOJ decision and to suggest that the decision was
unreasonable. In this context, the individuals to whom Inslaw made
its claims about Brewer's bias understandably had reason to doubt
those claims, particularly where their review of the merits of
DOJ's position convinced them that DOJ was being neither irrational
nor unreasonable. Based on our preliminary review of this issue,
we found no misconduct in DOJ's handling of Inslaw's claim that
Brewer's "firing" caused him to be unfair to Inslaw and "out for
revenge.-"

E . Inslaw's Proof Of Private Financing

Earlier in this report (in Part VI) we expressed the opinion
that DOJ officials could have made a greater effort to determine if
the version of PROMIS delivered pursuant to Modification 12 in fact
contained any privately financed enhancements. We considered
whether we should attempt to make that determination ourselves. We
reviewed the testimony presented at the adversary hearing, as well
as certain other evidence that was produced during discovery. It
was obvious to us that in order properly to evaluate the quality
and the reasonableness of Inslaw's proof we would need, at a

- 261 -

minimum, to obtain assistance from experts in the fields of
accounting,, software engineering, and government contracts. In
light of the magnitude of such an undertaking, and given Inslaw's
limited cooperation with our investigation, we decided to pursue
other aspects of our investigation.

It later became apparent that our analysis of and conclusions
regarding Inslaw's allegations of criminal and other intentional
misconduct did not require a determination whether the allegedly
enhanced PROMIS was in fact proprietary to Inslaw. Because our
investigation focused on determining whether there was any criminal
or intentional misconduct by DOJ employees, our inquiry required us
only to examine what conduct occurred find why. Thus, we were more
interested in trying to determine why and how DOJ obtained the
allegedly enhanced version of PROMIS than in whether the
enhancements were in fact proprietary. In our view, it would have
been wrong for DOJ employees to "steal" the enhanced version of
PROMIS even if it later turned out that the enhancements were not
privately funded. Similarly, because the evidence showed that DOJ
employees acted in good faith in obtaining and installing the
allegedly enhanced PROMIS, we believe that it was irrelevant to our
investigation whether Inslaw could assert a valid claim of
proprietary interest in that version of PROMIS delivered under the
contract. The question whether DOJ misappropriated the allegedly
enhanced software, the issue addressed in this report, is entirely
separate from the issue whether DOJ's use of the allegedly enhanced
PROMIS was a breach of contract. The breach of contract claim was
a civil matter that Inslaw could have litigated in the proper

- 262 *

forum, the DOTBCA, but instead chose to present as a novel legal
theory in the Bankruptcy Court. in the end, that was an
unsuccessful litigation strategy. This report expresses no opinion
on that issue. 101

101 As noted elsewhere, we believe DOJ’s current use of PROMIS
{which is limited to EOUSA and the U.S. Attorneys' offices) is
permitted under Modification 12. If DOJ wishes in the future to
use "enhanced" PROMIS beyond EOUSA, then it will need to determine
whether Inslaw has a‘ vklid claim of proprietary interest. That is
a question that is beyond the, scope of our investigation.

- 263 *

XII. CONCLUSIONS

Based oh all the evidence discussed in this report, we find
that there is no credible evidence to support either the allegation
that there was a scheme to defraud Inslaw, or the allegation that
DOJ employees conspired with Earl Brian to steal inslaw' s software.
Although we believe (for the reasons discussed in Part VI above)
that it would have been preferable for DOJ employees to have told
Inslaw why DOJ rejected Inslaw's attempted proof of private
financing, we are convinced that these employees genuinely believed
that they were acting within DOJ's rights under the contract.

In retrospect, it is easy to see that both Inslaw and DOJ
possibly could have avoided many of their disputes by acting more
wisely. If, for example, inslaw had maintained a historical
version of PROMIS that contained only the features called for in
the EOUSA contract, it could have simply delivered that public
domain version of PROMIS when asked by DOJ for a copy of the
software being used to perform the contract. In that way, all of
the questions about DOJ "stealing" a proprietary version of PROMIS
would have been avoided. Similarly, if at the time of its original
request for a copy of the software being used to perform the
contract DOJ had insisted on an enhancement- free version of PROMIS,
it could have avoided the problems that later arose in implementing
the resolution procedures of Modification 12.

The disputes between DOJ and Inslaw were fueled by the mutual
distrust that appears to have characterized Inslaw's relationship
with DOJ. While we do not share Bankruptcy Judge Bason's view of
Brewer as a man consumed with hatred and out to destroy inslaw, it

- 264 -

does appear to us that, for the reasons discussed in this report,
Brewer and others at DOJ distrusted William Hamilton, and felt a
need to be aggressive in asserting what they believed to be the
government's rights under the contract. At the same time, Hamilton
and others at Inslaw distrusted Brewer, and quickly came to the
conclusion that he and Videnieks were motivated by personal animus.
Once they had reached that conclusion, every contract decision made
by DOJ that was adverse to Inslaw seemed to them to be further
evidence of a desire to ruin Ins law.

while this atmosphere possibly explains Inslaw's claims that
it was the victim of unfair and biased conduct, it offers no excuse
for the ever- expanding allegations of widespread criminal conduct,
especially the claims of a criminal conspiracy involving Earl
Brian, the CIA, former Attorney General Meese, and others. We
spent considerable time and resources trying to find evidence of
the type of criminal conduct described by William Hamilton and his
lawyers in their various affidavits and memoranda. As we have
described in detail in the previous pages, there is a total lack of
credible evidence to support the criminal conspiracy theories
alleged by Inslaw.

Material Omitted Pursuant to
Fed. B. Crim. P. 6(e)

- 265 -

Material Omitted Pursuant
Ped « E.. Crim* p #i 6(e).

to

We cannot fail to note also the degree to which William
Hamilton's statements and assertions do not withstand scrutiny. We
repeatedly encountered witnesses who, in a very credible way,
denied making the statements attributed to them by Hamilton. The
witnesses who contradicted Hamilton were both friend and foe of
Inslaw, and we could not explain the constant contradictions as
simply the efforts of Hamilton's enemies.

There have now been at least five 104 formal investigations
into the claim that DOJ officials engaged in a criminal conspiracy

■Material Omitted Pursuant to
?ed... E._ Crim.. P.. 6(e).

104 OPR, DOJ*' s Criminal Division, the Senate Permanent
Subcommittee on investigations, the House Judiciary Committee, and
us .

- 266 -

to steal PROMIS for the benefit of Earl Brian and other "friends"
of the Reagan-Bush administrations. Not one investigation has
concluded that such a conspiracy existed. To the contrary, four of
those investigations (including ours) have specifically concluded
that there is insufficient evidence of any such conspiracy. Even
the House Committee, which concluded that the allegations should be
further investigated, stopped short of making any findings about
the alleged conspiracy. It is remarkable that even after these
separate investigations concluded that there is a lack of evidence
to support the allegations made by inslaw and others about a Brian*
DOJ conspiracy, the claims still are repeated in the popular press.
We are not so naive to believe that bec.ause we add our voice to the
chorus the accusations of conspiracy will now end. But we note
that the intense media coverage given to these claims of a criminal
conspiracy reflects not so much the existence of any credible
evidence to support the claims, but rather the willingness of many
to repeat the allegations without regard to whether they are
supported by any credible proof.

In summary, for all the reasons discussed in this report, we
find that there is no basis for initiating any criminal charges or
disciplinary action against any past or present DOJ employees.

- 267 -

REPORT OF THE UNITED STATES
DEPARTMENT OF JUSTICE

On the Review of Special Counsel
Nicholas J. Bua’s Report on the Allegations of INSLAW, Inc.

September 27, 1994

[Portions of this report have been deleted
pursuant to Rule 6(e) of the Federal Rules of Criminal Procedure.]

Table of Contents

Page

I. Introduction 1

II. Scope Of Review 3

III. Summary Of Conclusions And Recommendations 7

IV. The Allegations Of A Conspiracy By Department Of

Justice Officials To Steal PROMIS And Distribute
It Within The United States Government And
Internationally 11

A. AnonymOtis Sources 17

B. There Is, No Credible Evidence Supporting
INSLAW's Allegations Of A Conspiracy

Involving Judge D. Lowell Jensen 19

1. Ronald LeGrand's Confidential Source 23

2. Marilyn Jacobs 28

3. Janis Sposato 29

C. ThOre Is No Credible Evidence Supporting
INSLAW ?s Allegations Regarding A Department

of Jiistice/Earl Brian Conspiracy 30

1. Michael Riconoscuito 32

2. Ari Ben-Menashe 36

3. Charles Hayes 41

4. circumstantial Evidence Of A Conspiracy .... 43

5 . John A. Belton 50

6. The Alleged Videnieks/Hadron Connection .... 53

7. conclusions Regarding A Brian/DOJ

conspiracy 58

D. There Is Insufficient Evidence To Conclude That

INSLAW * s PROMIS Has Been Distributed By The
Department Of Justice To Other Agencies Or
DSpart&ents Of The U.S. Government 59

1. There Is No Evidence That The FBI's FOIMS
System Was Pirated From Or Based On PROMIS. 59

2. There Is No Credible Evidence That INSLAW's
PROMIS Is In Use Or Has Been In Use In Any
Agency Of The U.s. Government Other Than

The Department Of Justice 67

E. There Is No Credible Evidence That The Department

Of Justice Or Individuals Involved With The
Department Of Justice Improperly Distributed
PROMIS Software To Foreign Governments Or
Entities 72

1. The Alleged Distribution Of Enhanced

PROMIS To Israel 74

2 . The Alleged Distribution Of Enhanced

PROMIS To Canada 81

3. The Alleged Involvement Of Robert Maxwell
In The International Distribution Of

PROMIS 84

F. There Is No Evidence That The Department Of

Justice's Office Of Special Investigations Is
A "Front" For The Department's Own Covert
Intelligence Agency 86

G. There Is No Credible Evidence That INSLAW-
Related Documents Were Improperly Destroyed

By The Justice Department Command Center 89

H. There Is Insufficient Evidence To Support

INSLAW's Allegation That Department Of Justice
Employees Conspired To Improperly Convert
INSLAW's Bankruptcy Case 94

I. There Is No Credible Evidence That The Depart-
ment Of Justice Obstructed The Reappointment

Of Bankruptcy Judge George Bason 99

J. Conclusion 102

The Weight Of The Evidence Indicates That J. Daniel
Casolaro Committed Suicide 107

A. scope Of Review 110

B. Casolaro' s Death 112

1. Discovery Of The Body 112

2. The Death Scene 113

3 . Interviews Of Hotel Employees 117

4. The Coroner's Investigation 117

5. Handling Of Death Scene Following

Removal Of Body 118

6. Examination And Embalming Of The Body At

The Funeral Home 118

7. Notification Of Next-of-Kin 121

C. The Autopsy 123

D. Additional Police Investigation 127

E. Our Investigation 132

1. "The Octopus" 132

2. August 5-10, 1991 134

3. Mr. Casolaro's state Of Mind In

August 1991 145

4. Allegations Concerning Mr. Casolaro's

Death 157

F. Conclusion 168

VI. The Attorney General Should Not Appoint An
Independent Prosecutor To Further Investigate

INSLAW's Charges 169

VII. The Department of Justice Should Not Authorize The

Payment Of Any Additional Compensation To INSLAW 172

A. The History Of INSLAW's Monetary Claims 173

B. INSLAW is Barred From Asserting Any Additional

Claims Against The United States 178

C. The -Circumstances Surrounding- INSLAW's

Allegations Do Not Warrant The Waiver By The
United: states Of The Statutory Time Bars To
INSLAW's Monetary Claims 180

I.

Introduction

In March 1982, the United States Department of Justice
awarded a $10 million, three-year contract to INSLAW, Inc. , to
install the public ddmain version of a case management software
program in 20 large U.s. Attorneys* offices around the country
and a modified word processing version of the same software in 74
other offices. The software, developed by INSLAW with public
funding from the Law Enforcement Assistance Administration, is
known as the' Prosecutor ' s Management Information System or
PROMIS.

The relationship, between the Department and INSLAW quickly
deteriorated into a? series of disputes that have continued for
over 12 years. The most important early dispute centered on the
question whether ilNSLAW had any; proprietary rights in an
allegedly enhanced version of the software that INSLAW used to
perform its obligations under the contract, and, if so, .whether
the Department Was obligated to compensate INSLAW for use of the
enhanced software in an amount greater than that called for in
the contract.

In the intervening. years, the allegations, of , misconduct on
the part of Justice Department officials made by INSLAW have
growrt c considerably. INSBAW and its principals, have accused
Department officials of everything from conspiring to destroy
INSLAW and steal* the PROMIS software to being actively involved
in the fourder of a free-lance journalist. They have also alleged
that a version of PROMIS modified on a California Indian

reservation with a "trap door" that allows eavesdropping by U.S.
and Israeli intelligence agencies has become a major tool in the
arsenals of those organizations, in the process of making these
allegations; they and others have linked incidents involving the
Justice Department's relationship to INSLAW with, among other
things, the alleged conspiracy carried out by the Reagan campaign
in 1980 to delay the release of American hostages held in Iran
until after thte 1980 election^ the Iran-Contra affair and the
late British publisher Robert Maxwell.

The dispute has spawned a lengthy bankruptcy proceeding that
was eventually dismissed for lack of jurisdiction, several
related duits including one seeking the appointment of an
independent ’counsel , two congressional investigations and a
series of internal Department reviews and inquiries. On
November 7, 1991, then Attorney General William Barr appointed
Judge Nicholas J. Bua to serve as a special counsel to
investigate all allegations of wrongdoing related to the INSLAW
affair. Ih ; March ‘1993, Judge Bua and his staff submitted their
report to rieVly appointed Attorney General Janet Reno. Judge
Bua's report concluded that there was no credible evidence of any
cri^inaii^'^rbrigdoitig^dh r l!ifte part of any past or present Department
employee. ’■ w ■' ' ? ~ . ..

After providing INSLAW with an opportunity to comment on
Judge Bua's findings, Attorney General Reno ordered a senior-
level review Of Judg r e : Bua ' s- r report and INSLAW ' s analysis of that
report ahd directed that Whatever > additional i invest igation

2

necessary to advise her on how to proceed on this matter be
undertaken. This report summarizes the analysis and
investigation undertaken pursuant to the Attorney General 1 s
mandate and contains our recommendations.

II . Scope of Review

It should be noted at the outset that this report does not
purport to reflect a completely new ahd separate investigation of
all of the allegations relating to the INSLAW matter. Rather,
this report primarily reflects our independent conclusions
reached aft:er a detailed review of the investigation and report
of the Special Counsel as well as the documentation and testimony
accumulated in several other investigations. Accordingly, this
report should be read ifi OonjunctiOn with the Special counsel's
report, "a cOpy of which is attached as Addendum A to this
report . 1

We have, however, conducted our own interviews and performed
our own investigation relating to a few select allegations where
we believed INSLAW raised legitimate questions in its rebuttal to
the Special Counsel's report or where we believed additional

■J’ ■ V ■ ■ , n’, - , f 2

. 1 Because we^ intend this report to constitute a review of
the Special CounSei^s report and to be read in conjunction with
that. report, we have not repeated all of the allegations made by
INSLAW that We£e addressed in the Special Counsel's report or all
of the investigatory findings of the Special Counsel . Nor have
we restated "i:he frabts Ooncernirig the reiatioriship between INSLAW
and the .Department of Justice, ,It is our intention that the
Special ‘Counsel T s report be considered the primary document and
our analysis constitute a supplement to it.

- 3 -

efforts were warranted.. In addition, INSLAW's allegations are
constantly expanding and evolving. To the extent INSLAW raised
new allegations following the completion of the Special Counsel's
report that warranted additional investigation, we attempted to
perform an appropriate review.

Our review and analysis included the following steps:

Review of the Special Counsel's Investigation : We carefully

studied the Special Counsel's report, the July 12,. 1993 Analysis
and Rebuttal of the Bua. Report submitted by INSLAW ("INSLAW
Rebuttal") and the February 14, 1994 Addendum to the Analysis and
Rebuttal of the Bua Report also submitted by IljTSLAW ("INSLAW
Addendum"). In addition# we reviewed the papers, documents and
testimony compiled by the Special Counsel and his staff during
their sixteen-month investigation and spoke, with several of , the

r -

investigators about the investigation and their conclusions. The
primary purpose of this review was to ensure that the results of
that investigation fully supported the conclusions reached by the
Special Counsel., and .were not reasonably susceptible to different
interpretations.

INSLAW and its counsel have been extremely critical of the
Special Counsel's report. Although those criticisms are
contained in great detail in the INSLAW Rebuttal and INSLAW
Addendum submitted to the Department of Justice, we held several
meetings .’with INSLAW ' s principals , William "and^NanCy Hamilton,
and its^, counsel to be; Sure that they 1 had an, opportunity to
present fully the. evidence that they maintain supports their

4

allegations* In addition to a general meeting , we also met with
the Hamiltons and their counsel on one occasion to discuss their

monetary .claims against the government and on another occasion to
allow them to, present evidence related to the death of J. Daniel

Casolaro, a free-lance journalist who police have concluded
committed suicide but INSLAW maintains was murdered. „ These
meetings lasted several hours.

Review of other Investigations : We also carefully reviewed

the reports prepared by other entities both within and outside of
the Department of Justice on INSLAW* s allegations, and we have
read the various, judicial opinions that have been issued.
Although. we analyzed all the available reports and published
opinions, we concentrated our efforts on the two that were most
critical of the Department of Justice: the September 10, 1992
report of the House Committee on the Judiciary, "The INSLAW
Affair," .and the January 25, ^1988 opinion of Bankruptcy Judge
George F. Bason, Jr. in In re INSLAW. Inc. . 83 B.R. 89 (D.D.C.

1988) . . ... ^

We are grateful to Chairman Jack Brooks and his staff for
their cooperation . during our review of the House Committee on the
Judiciary report ("[House Report"). The Committee made all of the
documents , , notes . and testimony compiled by the Committee
investigators available to us. We carefully analyzed those

documents that Were the most relevant to our review. 2

t. i'i . • •> •* ■

did not* seek access to the records relating to the
September j.§&9 report}; of theJPerinanent SubObinmittee - on
Investigations of the Committed 1 oh i Governmental 1 ' Affairs of the

5

We also carefully read and analyzedf Judge Bason's opinion.
While we did not review all the transcripts of the bankruptcy
proceedings nor all of the exhibits introduced, we did spend a
considerable amount of time reviewing documents and testimony
presented during those hearings.

Anonymous Sources : Many of the allegations made by INSLAW

have been based on statements that anonymous sources have
allegedly made to Mr. Hamilton. According to INSLAW and Mr.
Hamilton, these individuals — many of whom are allegedly senior
officials at the Justice Department and other government agencies
— are fearful that if they come forward they will fall victim to
reprisals. Because of the change in Administrations and the new
leadership at the Justice Department, we were hopeful that these
alleged sources would feel comfortable speaking directly with us.
As discussed below, we made considerable efforts to provide
reasonable safeguards that would have protected any alleged
sources were they to have come forward. Unfortunately, only one
such source (and this source "belonged" to a Senate investigator
and not to Mr. Hamilton) agreed to speak with us.

Investigation of the Death of J. Daniel Casolaro : INSLAW

was also extremely critical of the Special Counsel's review of
the investigation undertaken by local West Virginia authorities

United States Senate ("Senate Staff Report") for two reasons.
First, the Senate staff Report concluded that there was no
evidence of a conspiracy involving Department of Justice
officials and, thus, is largely consistent with the Special
Counsel's Report. Second, the Special Counsel was provided
access to those records during his investigation but was not
provided access to the House records.

-6

following the death of Joseph Daniel Casolaro. Mr. Casolaro was
a free-lance writer who had been investigating claims made by
INSLAW at the time of his death in 1991. Although local police
twice concluded that the cause of Mr. Casolaro 's death was
suicide, INSLAW and others have asserted that he was murdered in
order to keep him from revealing information he had uncovered
involving the government's wrongdoing in connection with INSLAW.
We committed substantial resources to investigating the
circumstances surrounding Mr. Casolaro' s death. The breadth of
that investigation and the conclusions reached are provided in
detail in Section V below.

Other Investigation : In addition, we investigated several

of the allegations made and ! leads provided by INSLAW that were
not included in the other investigations. Those efforts focused
on, among other things, INSLAW's allegations concerning the
distribution of PROMIS to other government agencies and INSLAW's
allegation that software currently in use by the Federal Bureau
of Investigation is actually INSLAW's PROMIS. Those and other
efforts are described in detail in the relevant sections of this
report.

III. Summary of conclusions and Recommendations

Following our review and analysis, we reached the following
conclusions and- recOmmendat ions:

(1) We recommend that the Attorney General adopt the

7

Special Counsel 's report in its entirety. ,More r specif ically, we
recommend that the Attorney General adopt the following
conclusions reached by the Special , Counsel , all of. which are
fully supported j by the available evidence: , 4

There is^ no credible evidence to .support the allegation
that members of DOJ conspired with Earl Brian to obtain or
distribute; • PROMIS.. software . The overwhelming weight .of they
evidence is that there was absolutely no connection between
Earl Brian and anything .related to Inslaw or, PROMIS
software.

There is woefully insufficient evidence to support the
allegation that DOJ obtained; aiv enhanced ye^rs ion :
through' "fraud, trickery, and deceit," or that DOJ
wrongfully districted fROMIS within or outside of DOJ. To
the contrary, we are convinced that DOJ employees undertook
actions with respect to Inslaw that they genuinely believed
were in the best legitimate interests of the government.

We also find that DOJ conducted itself properly after
it; became involved in*} litigation with Inslaw. , ..

. We . find thatythere is no credible evidence /that- DOJ.,.
employees sought to improperly influence the selection
process that} resulted in the decision not to; r eappo i nt
Bankruptcy Judge Basbn.

We find that there is insufficient evidence to support
the allegations that* DOJ. employees attempted to .improperly
influence the U.S. Trustee to convert the Inslaw bankruptcy
case, or that DOJ employees committed ;per jury in jorder to
hide this bbstructidn.

Finally, we find that there is no evidence to support
the allegation that DOJ; employees destroyed any documents
related to Inslaw or otherwise acted improperly in order to
obstruct congressional investigations into Inslaw's
allegations.

(Bua Report 13-14.)

(2) We also find that there is no credibl.e evidence that
employees of the Department of Justice conspired with ( anyone to
steal PROMIS ofccto injure INSLAW in any other way..«-

8 -

(3) There is no credible evidence that the Office of
Special Investigations in the Justice Department's Criminal
Division is engaged in covert intelligence activities or that it
has participated in the illegal trafficking of PROMIS software or
in the death of J. Dahiel Casolarb. Rather, the Office of

Special Investigations appears ‘ to be wholly committed to its
mission of locating World War II War criminals and other related

l

matters. j

(

(4) The cohclusion reached by Martinsburg, West Virginia
authorities that the death of J. Daniel Casolaro was a suicide is
fully supported by the facts surrounding his death. There is no
credible evidence that Mr. casolaro was murdered. Furthermore,
there is no credible evidence linking any Justice Department
official or any individual other than Mr. Casolaro himself to his
death.

■f

(5) We find there is no bas
independent prosecutor to further

Accordingly, we recommend that the Attorney General not appoint

j

any such counsel.

(6) We find, after reviewing all the issues raised by
INGlaw, that the circumstances sujrrounding these allegations do
not warrant the waiver by the United States of statutory time
bars to INSLAW's various monetary 'claims against the government
and recommend that the Attorney General not accede 1 to INSLAW's
requests for monetary bompensation. INSLAw was provided a full

is for the appointment of an
investigate these allegations.

and fair opportunity to litigate its claims against the
government before the appropriate administrative and judicial
tribunals. There is no credible evidence that individuals
associated with the .Department ^f Justice or any other government
agency did anything to frustrate those efforts. Furthermore, we
find that the positions taken by the Department on the issues in
dispute were fully supported byi the facts of the case. The
ability of INSLAW and its counsel to keep this matter in the
public spotlight by making a series of unsubstantiated
allegations linking this affaiiq to some of the major alleged
conspiracies of the last 15 years should not be rewarded by
acquiescing to their monetary demands.

(7) Finally, we recommend that the Attorney General take
those steps necessary to bring this entire affair to closure from
the Department’s perspective. INSLAW's allegations have resulted
in two congressional investigations, several internal Department
of Justice inquiries, the appointment of a Special Counsel and
numerous law suits. The Special Counsel concluded, and we
concur, that virtually all of these allegations were based on
nothing mote than uncorroborated conjecture, on hearsay
information from anonymous , sources or on information received
from patently unreliable sources. In the process, the reputation
and integrity of several Justice Department employees have been
unfairly impugned.. We, .cannot pleasure the toll those attacks have
taken. However, ye believe that a statement from the Attorney
General that she considers the matter closed (absent the

10

discovery of compelling and verifiable evidence contrary to the
conclusions contained in this report) would at least begin the
process- of remedying the effects of INSLAW's groundless
allegations.

| . ( ,

IV. The Allegations Of A Conspiracy By Department Of Justice
Officials To Steal PROMIS And Distribute It Within The
United States government And Internationally.

i

* * j • . . 'V-.

INSLAW has made numerous allegations concerning conspiracies
among high-level DOJ officials to siteal INSLAW's Enhanced PROMIS.
Although it is difficult to summarize those charges, they revolve
around several basic theories. INSLAW's counsel described those
various theories as constituting concentric circles with the
outer circles encompassing the broadest and most far-reaching
conspiracies. As a review of those theories will indicate, the
conspiracy allegations have evolved over time, overlap with each
other in some significant respects,; and, on occasion, contradict
one another. The primary focus of the Special Counsel's
investigation was on these conspiraicy accusations.

The most basic conspiracy theory focuses on the relationship
between Madison Brewer, the Department of Justice official with
primary responsibility to oversee the implementation of the

■ i. :• i j O ■■ ' ‘ 'K? J ,1 , V ■'

PROMIS contract, and INSLAW. According to this theory, Mr.

Brewer was consumed by hatred for both INSLAW and Mr. Hamilton as
the result of his dismissal as general counsel of INSLAW's non-
profit predecessor in the late 1970s. As a result, Mr. Brewer,
in his role as the administrator of INSLAW's largest and most

- ll-jr ■

important contract; set out to destroy the company. Peter
Videnieks, the i Department's contracting officer for the PROMIS
contract, was allegedly an important accomplice in that effort.

An important element of this theory is the role played by
Judge D. Lowell Jensen. According to INSLAW, Judge Jensen was
the central figure in an effort *jto force* INSLAW out of business
so that DOJ's PROMIS -based business could be awarded to political
friends and supporters of the then-current administration."
(INSLAW Rebuttal 67-71.) From 1981 to 1986, when he was
appointed to the District Court for the Northern District of
California, Judge Jensen served successively as Assistant
Attorney General for the Criminal Division, Associate Attorney
General and Deputy Attorney General. According to INSLAW, Judge

Jensen was driven by the fact that he believed the Department of

■-■■■ ; r * 1 . ■ |> ' ■ ■ '■■■:■' - • . • '• • -

Justice made a mistake in installing PROMIS as its case

•’ ' •: ' <■ j- ■ ■-■VO ... ; * .

management software rather than a competing software product that
had been developed under Judge Jensen's supervision when he
served as District Attorney of Alameda County, California in the

• j . ■ ^ j . .

1970S.

INSLAW maintains that Judge Jensen "engineered" a series of
sham contract disputes with INSLAW to drive it out of business.

Furthermore, Judge Jensen allegedly furthered this conspiracy by

■ ■■■' ^ • f-*" > j ■*- . 4 ■ • . ■ ;

ignoring INSLAW's complaints about the conduct of Mr. Brewer in

the implementation of the PROMIS Contract and by failing to refer

• - K 'if, .. i • ' •

certain allegations to the Office of Professional Responsibility.

i .. ■

Another conspiracy theory advocated by INSLAW focuses on Dr.

12

Earl Brian. According to this theory, high level DOJ officials '
conspired^ with Dr; . Brian, a businessman and formerly California's
Secretary of Health and Welfare ^uncfer Governor Ronald Reagan in
the early 1970s, to steal PROMIS and destroy INSLAW. According
to IN S LAW >! the goal of „ this alleged conspiracy was to force
INSLAW into: bankruptcy so that Hadrony Inc.; a company connected
with Dr. t B rian, could buy INSLAW.' s assets, including its rights

to PROMIS. Subsequently, the Justice Department would award
Hadron a- "massive sweethearts contract. "

The evidence that INSLAW maintain^ proves the existence of
this conspiracy focuses on efforts allegedly made by Hadron and
related entities to purchase INSLAW's assets. INSLAW asserts
that key Hadron officials travelled to New York in September 1983
to raise, $7 million for the ^acquisition of INSLAW's PROMIS. When
those efforts failed, INSLAW claims:* that Dr; Brian and the
Department of Justice adopted; another vehicle to . provide Dr.

Brian with the sweetheart deal from his friends in the Reagan

Administration. In order to ensure >that INSLAW would not be in a
position to-disrupt that deal, INSLAW maintains that Systems and
Computer Technology, Inc. , at the ejncouragement of the
Department, attempted to purchase INSLAW. Those efforts were
also unsuccessful.

iracy. This conspiracy theory

A closely' related but distinct! series of allegations center
around the "October Surprise" consp:
is largely the same ras the Brian cdr
However, this ; theory contains, twot

jnspir acy descr ibed above .
important additional -••••

allegations. >First, it I maintains that Dr. Brians was involved in '
various covert operations and; that "he had a central role in
bringing about a delay runtil hftet- the 1980* Presidential election
in the release of 'the American hostages held by Iran. ("The
INSLAW Case: Crimes, Criminals, and Grounds for Prosecution," ‘

Memorandum to Judge Bua from INSLAW, January 14, 1992 ("INSLAW
Crimes?'] 42-43 . ) ■. The allegedi conspiracy undertaken by the' Reagan
campaign to delay the' release of the American hostages has been
commonly referred to in the media as the "October* Surprise. ">
Second, this theory asserts that Department officials ^
participated with' Dr. Brian and Hadron in a conspiracy to steal
PROMIS in order- to reward Dr.’ Brian for his key role in the
successful- October Surprise conspiracy.

The next series of conspiracy theories advocated by INSLAW
center on the roles uallegedlyr played by Various UiS. and foreign
intelligence agencies. The firstf alleges that the primary '
motivation behind the alleged > theft of PROMIS was "to use it as a
means of penetrating the intelligence and law enforcement
agencies of other governments'*" (INSLAW Crimes 33.) According to
a summary of crimes allegedly! committed in relation to'these
matters submitted ..to the Special Counsel by INSLAW, the scheme
worked as follows:

The first step in this 'scheme was the sale to the foreign
government of a computer into which had been inserted a
. microchip ; capable of transmitting to a U.S. surveillance
system the electronic signals emitted by the computer when
in user Where ~ stich a sale would have violated* U. S. export
administration regulations, U.S. intelligence personnel
would connive With the - U , S . Customs Service tb^slip the
computer past the normal controls. To facilitate the

14 *

National, Security Agency’s. ability to "read" the signals
transmitted fay the microchip, the software used in the'
computer had to be a product with which the, U. S . was already
familiar. As explained in part 1(A) (1)' above, Enhanced
PROM IS has capabilities that make it ideally suited to
tracking the aritivitie's of a spy network. ' it was necessary,
therefore, ( to induce the foreign purchaser of a doctored
computet also to purchase PROMTS : ‘

( INSLAW Crimes 33-34.) According to INSLAW, Dr. Brian was the
principal’ sales agent of PROftls to foreign governments and
agencies.

Also, according to INSLAW, modifications to Enhanced PROMls
were made' by Michael' Riddriosciuto in a trailer on' the Cabazon

Indian Reservation In Indio, California in the early 1980s.
According to INSLhw- he modified PROMls with a ’’trap door” which
allowed electronic eavesdropping by the united States government.

A slightly hr odder conspiracy' theory advocated by INSLAW
alleges 1 tliait the Department of Justice and Israeli intelligence
agencies acted ris partners in the theft arid international
distribution of PRbMIS. INSLAW also asserts that the late

British publisher Robert Maxwell assisted Israeli intelligence
agents iri the dissemination of PROMIS to the intelligence and law
enforcement’ agencies of other governments arid to- International
commercial banks. ! According r to this theory/ Israeli intelligence
agerits also colluded ^ith Department of Justice officials to

preverit INSLAW froin fiilly litigating its claims against the u.s.
government. Accordirig to INSLAW, an T Israeli agerit ’’provided
$600,000 from a sl’uSh fund/ that was jointly controlled by" u.S.
and Is ra4l i int ell igence , iri Order td get INSLAW* s lead counsel
fired so that INSLAW coUld no longer prosecute its PROMTS

15

proprietary rights anti license fee claims against' the U. S.

Justice Department.," (INSLAW Addendum 16 . )

Finally, m the Addendum to INSLAW *s. Analysis and Rebuttal
of the Bua Report dated February 14 ,,1994, INSLAW advanced for
the first time its latest. conspiracy allegation. According to
INSLAW, the Office., of. Special Investigations ("osi") in the
Criminal Division of the Department of Justice is, in fact, the
Department's own. covert intelligence agency with functions
totally unrelated to OSI' s declared mission,. of locating and
deporting Nazi war. criminals. INSLAW. asserts that OSI
participated in illegal trafficking of PROMIS software and in the
alleged murder of ; Mr . Casolaro.

Although tha, aboye summary attempts to group INSLAW's many
accusations, into discrete conspiracy theories in. order to make
them more readily .understandable,, INSLAW generally does not make
these distinctions. , ^Rather, INSLAW apparently maintains that all
of the allegations summarized above constitute one large
conspiracy to deprive, INSLAW of its r rights, in the PROMIS software
and to profit at,, INSLAW's. expense. Furthermore,. INSLAW alleges
the , conspir a cy wa% carried out by, among other, things, (.1) the
coverup of the involvement of. Department officials, including the
commission of, per ju*Y ty several, Department employees during and
after the .ba.ntc^pt<^ v ,^o^^din9S^r (2) the interference by
Department , officials,, with the reappointment, of Bankruptcy Judge
George Bason;. (3) the illegal distribution of Enhanced PROMIS to
other agencies, within the U*S* r government; (4) the-illegal

16

distribution of Enhanced PROMIS to foreign governments and to
international banking organization^; and (5) the murder of
journalist J. Daniels Casolaro. j

INSLAW has based the majority of its allegations on
statements allegedly made by individuals with first-hand
knowledge of relevant events but wlko insist - on anonymity due to
fear of government reprisals.. In Exhibit B — "A Synopsis of
Specific claims WjouI^ U.S. .Department of Justice (DOJ)

Malfeasance Against INSLAW Made by Credible Individuals Who Are
Fearful of- Reprisal" — to INSLAW' s Rebuttal, INSLAW describes ll
such individuals and summarizes the information each has
allegedly provided to INSLAW. According to INSLAW, these
anonymous sources include six current or former Justice
Department officials, two officials of unspecified, ti. S .
government agencies, a former World Bank employee , a computer
programmer- aboard a ; U. S . nuclear submarine* and a trusted friend
of the Hamiltons who "has a close relationship with one or more
persons currently holding senior level, positions in the Central
Intelligence Agency." INSLAW has referred to other anonymous
sources in other parts of its rebuttal and in other papers
submitted ?;to the. Department of Justice.

One of the central ; goals of oar review of the Bua Report was
to create an atmosphere that would encourage these alleged
sources to come forward. We hoped that the change of

administrations and. the appointment of Attorney General Janet
Reno would be key factors in that; effort. Furthermore, the
Associate Attorney General asked INSLAW's counsel in a letter
dated September 20, 1993 to convey the following extraordinary
assurances to the alleged sources;

First, the review of thi entire matter is being
conducted by attorneys in my j office at my direction.
Accordingly, the interviews of the subject witnesses will be
conducted by attorneys from my office who have had no prior
involvement in the INSLAW master in any way’i ’ In addition,
attorneys from the Attorney General ' s Office and the Deputy

•♦Vv

Attorney General ' s Office may participate in Some
interviews. v If it is necessary to include other individuals

'we iirill do so

r

from the Department in

only, after notifying the withess and receiving his or her
approval.! ' ‘ ,y:r ‘' ■ ’’ ^

Second, the distribution of the information obtained
from these interviews will be, limited to the Attorney
Genera '5 office J'" the Dejinity 1 Attorney General ' s Office and
my office to the extent possible. The distribution of any
information beyond these 1 offices will be done on a rieed-to-
know basis only . Any disclosure of information provided by
these witnesses thht might lOad to the 'identification of any
such witness to individuals who have previously been

involved in the

will

approval of the Attorney General.

i my approval or the

1 1

Third, the Attorney General and I provide our personal
assurances that wewill hot: tolerate any acts of reprisal by
Department employees against! individuals cooperating with
this invest i”'-* r ‘ ! f • '

Attorney General 'S Office, •

bearing on IN:

In addition, an individual was designated within the Associate

to INSLAW's request , to

receive information bearing on inslaW's claims in confidence.

Despite these exceptional hf
source contacted the Associate's
willingness to cbdper'ate ^ith Our

we asked INSLAW arid

fdrts, not a single INSLAW
office or otherwise indicated a
review. On several -occasions,

counsel to communicate the Attorney

General '.Sj assurances and to encourage the alleged sources to
speak with us. According to Mr. Hamilton, several sources

indicated to him that /they will not

come forward unless an

independent counsel is appointed to investigate INSLAW's
allegations while others allegedly insisted that the Attorney
General .make a public statement guaranteeing their protection
from reprisals. |

B.

There Is No Credible Evidence
Allegations Of A Conspiracy In
Jensen ♦ ’ ’ ’

Supporting INSLAW's
jvglving Judge D. Lowell

iNSLAW has made numerous allegations involving a Department
of Justice conspiracy spearheaded by united States District Court
Judge D. Lowell Jensen to destroy INSLAW and acquire PROMIS.
During the period in which Judge Jensen allegedly "engineered"
this conspiracy, he served successively at the Department as

Assistant

General for the

Criminal Di vis ion ,

disputes with INSLAW and ignored IN
allegedly unfair treatment at the h
Jensen was allegedly driven fc*

Attorney General and Deputy Attorney General. According to
INSLAW, ‘.Judge Jensen engineered a series of sham contract

•s complaints abdut its*
df the Department. Judge
fact that he believed a case
ed by the Alameda County

management

program

(California) District Attorney's Office while he waM District
Attorney wlis superior to tMe PROMI Si “program .

INSLAW points principally to the* following facts as "direct"
evidence o£ judge Jensen's involvement in a conspiracy: '

( 1 ) ’ *lls bis%ridt Attorney^ of

- 19 f

■*' , : - •i- - -y • . ,

Alimeda County in California

in the 1970s, Jensen developed case management software which
competed unsuccessfully against PJtoMIS in California. By the
time Jensen came to DOJ in early 1981, he believed that? DOJ had
been wrong to prdkote the use of PROMIS by district* attorneys • '
offices instead o-f his own case management software. "

(Declaration of William Hamilton', December 22 , 1989 ("Hamilton
12/22/89 Decl. "] 4.)

(2) According to INSLAW,, a Department of Justice source
told Ronald LeGrand, chief "investigator for the senate Judiciary
Committee, that "Jensen engineered INSLAW's problems right from
the start." The source also allegedly identified several senior
Department officials who .allegedly had information concerning
Judge Jensen |s involvement.

(3) Acco^ing to s Mr. Hamilton, "An informant who does not
wish to be named.vmtil .assured of protection against reprisal
told INSLAW with regard to the sham contract t disputes that in
1984, Marilyn Jacobs,. Jensen's secretary at DOJ, stated to the
informant that * Jensen was the main person behind the INSLAW
problem' and that 'his style was to operate using his
subordinates. ' " (1 (Hamilton 12/22/89 Decl. 11. )

(4) Janis Sposato, Deputy, Assistant Attorney General for
Administration^, allegedly told INSLAW during settlement
discussions involving a dispute over., computer time-sharing

* «» i-tij ■ Cl : 1 ■ , ' ! . '.I i V* . i *•; \> .5 ' .f ** t'lj, ' Cl'-y ■ ; '

billing,, in 1985 that, "My management upstairs is unwilling to
allow me to make anymore concessions." According to INSLAW, "At

the time, Sposato repoirted jdirectly to the Assistant Attorney

.... | ■

- 2 J) -

General for Administration, whose offices were on the same floor
as Sposato's. That individual, howtever, reported, in turn,
directly to Deputy Attorney Generali Lowell Jensen, whose offices
were several floors upstairs. INSLAW inferred then and infers
now that Sposato was alluding to Deputy Attorney General Lowell
Jensen's unwillingness to permit a resolution on the merits of
the Fiscal Year 1983 computer time-sharing issue because it was
DOJ's main ’fig leaf' for its wrongful withholding of payments
under the contract.” (INSLAW Rebuttal 69.)

. • »-• ,i * ■■■*.. < •«. - , j -

(5) According to INSLAW, William Tyson, then Director of
the Executive Office of United States Attorneys, told Mr.
Hamilton during a meeting on May 2,

your only problem. There is a Presidential appointee in the
current Administration who is so an
INSLAW that I have to maneuver to k
of the U.S. Attorneys for fear that he will so poison the well
that the project will have no chance of success." (INSLAW Crimes
10-11, n 7*) According to INSLAW, the presidential appointee

-••4 . ' f i • :• .* ■ v ^ v v r . -

referred to by Mr. Tyson must have been Judge Jensen. 3

7 ■=>/ *-<

1983, "Brick Brewer is not

tagonistic to PROMIS and
eep him away from the meetings

3 Mr. Tyson denies making such a statement to Mr. Hamilton.
Nevertheless , BankrTiptOy' Ifudge Bason arid INSLAW ’ both argue that a

March’ '29 1987 1 i&Mer "slsrftr* 4>y *Vt £ . Tysoh to Jiidge Jansen vowing to

continue den^ii^ %nder oath ‘that he had made 'such a statement
constitutes eVid^nce? that* ‘Mr'.- Tyson actually made the statement
and -that iippoihfced to who# he reverted. The

text ‘of thV ^lett'ei?', ' whidh was apparently "sent On the? 1 same day as
an article quoting from Mr. Hamilton’s affidavit about Mr.

Tyson’s alleged comments appeared in the Washington Post , states:

<r • ' • r ; , f? 'iv. .' •'"! V";‘ ' ' - T . ■'

I did riot make the ‘comments which Mr: Hamilton says? I made'.
Thdy ar^'SlflS'er’ ffcVStftlbh on hils* part.* I want' you to know
this because it appears that lie is trying to show that these

After considering and investigating INSLAW 's allegations of

J

Judge Jensen's involvement in a conspiracy with Dr. Brian and
others, the Special Counsel concluded that there was no credible
evidence of such a conspiracy. (A discussion of the evidence
involving Dr. Brian's involvement in the alleged conspiracy is
discussed in Section IV (C) below.!)

INSLAW is particularly critical of the Special Counsel's
investigation due to his failure, according to INSLAW, to
thoroughly investigate the specific allegations allegedly made by
Mr. LeGrand's confidential source. INSLAW also criticizes the
Special Counsel for simply interviewing the Department of Justice
officials identified by the source rather than calling them
before the grand jury. (INSLAW Rebuttal 44-46.)

Because of the extreme importance placed by INSLAW on the
statements allegedly made by Mr.
considerable effort working with

Judiciary Committee and Mr. LeGrand to arrange an interview of
the source. Those efforts were ultimately successful. The

LeGrand's source, we spent

■ .1 (. • 1

the staff of the Senate

statements, which I did not make, referred to you.

. -‘V , "ill O.. *• ; •.?..* % 1 ' s ^ y •. i ; u-' ■ . . ‘

My entire meeting with JSr. I amiltori consisted of 1 is ten ing. v
to his litany of complaints concerning the handling of the
IN SLAW contra ct>} especially in regard: to Mr . Brewer*
followed by. my, promise, to look into his complaints. I have
. denied under oath in *a depos ition this week haying made the
comments her .claims I made;rand,I will, continue .to: make such
denials inr any future* proceedings/; n .v ’ • «, ,

Far from evidence of some sort of complicity between Mr. Tyson
and Judge Jensen r; we .believe the J letter, reflects Mr. Tyson ' s
sincere concern that Judge Jensen understand that he neyer made
any- such statements. . -cy : v ' | - t .. ^

- 22 -

allegations attributed to that source and the. results of our
interview with him are described in detail below.

Based upon *the results of that and other interviews
described below and the records of the Special Counsel and House
investigations, we conclude that there is no credible evidence of
a conspiracy invalving Judge Jensen or other senior Department of
Justice officials. 4 - ; j

l. Ronald, LeGrand ? s Confidential Source

Of allvthe individuals who have allegedly provided
information to INSLAW and to others on a confidential basis

j ‘ ‘ •'

suggesting* a conspiracy against INSLAW by the United States
government, the only one to come forward and agree to be

interviewed during. our review of the Special Counsel's report was

' •• ; * .<■ ....

Ronald LeGrand's confidential source. Mr. LeGrand, the former

chief

investigator for the Senate

Judiciary Committee , had

4 Our conclusion rand the conclusion of the Special counsel

the Senate Staff study that it
ral Edwin , Meese , Deputy
or other Justice Department
iracy to ruin INSLAW, or to

is consistent with j the findings of
"found no.: proof that Attorney Gene:

Attorney? Genera 1 D . .Lowel 1 Jensen
officials were involved in- a consp

steal* INSLAW' s product -for, .their own benefit . " ( Senate Staff
Report 2ZJ. ) Although the Senate -staff did indicateVthat some
incidents raise ,thef specterjthat; Judge Jensen may have been
biased against .PROMIS and in favor of jthe Alameda County, program,
the repdtt concluded: i> <

Although rsucb bias, to the extent:. J.t,, existed, ^may have led
Jensen, as the Bankruptcy Court found, to be indifferent to
INSLAW's complaints about otter Department officials, it
does not > absent, further evidence t k translate . into
parstieipation in a abroad, -qpnspiracy to cripple InSLAW for
the [benefit iof Jensen or other Department of, Justice
Officials. •••■ The, Staff ; found no such 'further ^evidence. . .

(Senate Staff Report 27 . j ? We too fai iejd to find any such

evidence of Judge Jensen's involvement in a conspiracy .

23

)

several conversations in 1988 with an individual who requested
anonymity regarding the allegations raised by INSLAW. After Mr.

LeGrand shared" some of the details of those conversations with
Mr. Hamilton, a major controversy developed as to what
information the individual ("LeGrand* s Source") actually conveyed
to Mr. LeGrand. ( See Bua Report 113-120, INSLAW Rebuttal 44-46,

House Report 61-63.) Despite repeated efforts by the Special
Cotinsel and investigators from the House Judiciary Committee,

LeGrand* s Source refused to be interviewed . He did, however,
agree to be interviewed by us as part of our review. 5

i

In an affidavit dated December 22, 1989, MT. Hamilton swore

to the following: ' •!

5. In iate : April ! 1988, Rorlald LSGrand, then Chief ■

Investigator of the Senate Judiciary Committee, telephoned >

me to request a full brief ihg on the disputes between * INSLAW J

and DOJ. My wife and I subsequently briefed LeGrand at

IN SLAW on €he fcornirtg of May ll* - LeGrand telephoned me: two

days later with information that he said a trusted source

has asked him to convey. LeGrand described the source as a

senior career 1 official *£0 Ddl r "With- a title" whom LeGrand

had known f or IS year’s arid whose veracity LeGrand could <

attest tp without reservation. ’ Shortly after DOJ* s , public

announcement on May S', 1988 'that’ DOJ would not seek the

appoihtmentof an indepehdent^counsel in the IN SLAW matter

and that i% had cleared Meese of ahy ^rohgdoing, the source

t6 Id LfeGrand tlistti * thief iMSiiiW eas^'is ldfc/ dirtier for the

Depa^meht of Justice thari Watergate was, 5 both in its

breadth ahiid' ill-' its 1 depth.** * The- source •alsd' ,, suid that the

"Justice Department has been compromised Orr?the INSLAW, case

at every level." On several occasions since then, LeGrand

has Hdhf ifcmed what he told’ me, and on October 11, 1988,

ifMU t- • •; t4i • - , • ,<• ,

i ;i V *• { : ••• / ,• v; _

5 We are gfat4f ul'to ’ the'- 1 Senate Judiciary " Committee ,

Chairman Jpie^h Brdeh,^ the v sSia r €e ; Begar r Counsei , Mr. LeGrand and,
of course , LeGrand 1 s gourde ifbp cooperating with 'us and -allowing
us to ihte£Vi'SW IfeGfand * s Sbti'r ce i ? ' LeGrand 's Source stated that
he was willing to cooperate with' us despite his unwillingness to
cooperate With of his "respect for and

confidence iri ' Xttoirfiey' (Seheral 'Penoi ’’ ' ,v

- 24 -

Elliot Richardson, counsel to INSLAW, sent Robin Ross, an
assistant to Attorney General Dick Thornburgh, a memorandum
summarizing the statements attributed by LeGrand to his
source. In addition, the source made the following
statements: -

a. Jensen engineered INSLAW's problems right from the
start and relied for this purpose principally upon three
senipr DOJ ^officials: »jMiles Matthews, Executive Officer of
the Criminal Division; James Knapp, a non-career deputy
Assistjmt^ttgi^ey General in the Criminal Division; and
James Johnston/ Director of Contract' Administration in the

,* Justice rj Management Division. ^ Mile;s Matthews stated in the
presence of LeGrand ' s source ‘that "Lowell [Jensen] wants to
get INSLAW . out; ; of the way and give the business to friends . "

b. The g source told. LeGrand that s John Keeney and Mark
Richards [sic], each a career Deputy Assistant Attorney
General in > the Criminal Division, ,, and Philip White, the r
recently retired Director of international Affairs for the
..Criminal Division, knew "all about” the Jensen, malfeasance

in' the matter . Although Richards (sic] and White

were ’’pretty upset" about it, the source did. not believe
that either ot them would disclose what they knew except in
response to a .subpoena and undjer oath. The source added

that he did not think either R
commit perjury.

[sic] or White would

■ ■ ■" ’ j • _

-jC. The spurce believes that documents relating to
Project Eagle were shredded inside DO J, but that INSLAW
should nevertheless subpoena Dp J paperwork prepared by a
Jensen subordinate relating to the purchase of large
quantities of computer hardware for which the senior DOJ
career staff could see no justification.

(Hamilton 12/22/89 Decl. 19-20.)

• ■ > a t . ■ ’■ • < / 1 ■ t . v V. i . ...

According to the House Report,! "Mr. LeGrand provided little
corroboration of the Hamilton’s [sic] allegations" during a sworn
statement to house investigators . (House Judiciary Report 62.)

•.lW.4. . J ••

J- £■ ' ■"•J--

Furthermore, Mr. "LeGrand informed House investigator^ and the

c.wssrt i .t/.H • ‘i o. ( > L i’ ; f * ... , .

Special Counsel that, as far as he knew, none of the information

provided to him by his source was obtained first-hhnd. However,
Mr. LeGrand diet confirm to both House investigators and the
Special Counsel that hie believed that fits sburce dictprbvide to

- 25 4

him some of the “information reflected in Mr. Hamilton's ■

■■ ■ o -

affidavit.

On February 7, 1994, we met with LeGrand's Source in a
private d'ihin'g room at 'a local'club. Mb. LeGrand and Morgan

Frankei, Assistant Le'g’al Counsel tor the United 'States Senate,

were also* preWent . /Although

ind's

to

ti :> “ ■ r

the individual Wfe 1^ t erv iOwe d wai s

LeGrand 's Sburce irifoifified^usl

t* «»#• **<r?

anonymous/ in arty report, he identified himself to Us, and we were
able to : vet if £ thft'he is a long-time career employee of the
Department of justice./ : He 'informed us* that he 1 has known Mr.
LeGrand for a ppfo# imS t e ly 20 years. Mr. LeGrand corif irmed that

indeed his confidential source,
that he fias information

' ' N > .. > • ‘ *•' ; ' T !

indicatitf^ that kHyori& at tti& ! De^ttmiht of Ju§tic§ Was involved
in any wrongdoing involving the FROMIS software or INSiiAW. He
stated that be ; has ho first-hahd knowledge of any misconduct by
anyone in relation 'to PROMTS ; or INSLAW. He further stated that

i

he would consider credible

he has net heatd’ any rumors which
about any such misconduct.

LeGrand's Source stated that the subject of INSLAW came up
during a friendly conversation with Mr. LeGrand in ,1987 or 1988.
During the conversation, he told

investigating those allegations he would contact Miles Matthews.
LeGrand's Source said that he suggested contacting Mr. Matthews
because he was aware that the Justice

•. . ii.'t-: ;1- J--: :> - r*

PROMIS in various U.S. Attorneys'!

«r,3 '*fr f e-'t v * i -- f j

because he believed Mr. Matthews

Mr. LeGrand that if he were

-i; . • /• ■I'M?** r v» ___ Y_.v- r

had installed

offices in the early 1980s,

: '• 1-, . n. >'r ‘i r j Y, ■ >

was, responsible for procurement

I

I

j

matters for the 1 Criminal Division at that' time, and because he
did not particularly like or trust Mr; Matthews. He stated that
he did not have any information — nor had he heard any rumors --
linking Mr. Matthews to any wrongdoing connected^ with INSLAW or
PROMIS. - ■* .*■- ■ •:

He also stated that he never mentioned Lowell Jensen, Mark
Richard, Philip White, James Johnston or James Knapp to Mr.
LeGrand. He stated that he believed that there was "no way in a
million years" that: Mr. Keeney would be involved in any
wrongdoing. LeGrand *S Source also! stated that he did not believe
any of these other individuals would be involved in any type of
cover-up

Finally, we read the above excerpted portion of Mr.
Hamilton's statement to LeGrand 's Source. He stated that: none of
the statements or belief s attributed to him in the statement are
accurate. More specifically,, he stated that he r never said or
believed any. of the comments attributed to him,- that he never had
reason to. believe that any of the Department officials identified
in the .statement were" involved ; in any wrongdoing or had knowledge
of any wrongdoing’ by other DOJ officials* and that he never had
reason' to believe 1 that any documents related to Project Eagle
were improperly, shredded. i

The investigation undertaken by the* Special Counsel is
consistent with much of what LeGrand ' s Source told us. In an
interview with the Special Counsel and in an earlier sworn
statement to the ■'Office" of Rrofessional Responsibility* Judge

- 27 K •

Jensen denied any effort on his part to injure or bankrupt INSLAW

or to "engineer" any contract disputes; with the company. Messrs.

!

Matthews; Knapp, Johnston, White, j Keeney and Richard all also
denied having ariy; knowledge of wrongdoing by Judge Jensen or of

i

any wrongdoing of the type described in Mr. Hamilton's affidavit.
(Bua Report 118-120.) - • j-

2 . Marilyn Jagofo;

We also interviewed Marilyn Jacobs who, according to Mr.
Hamilton, told an anonymous informant that Judge Jensen "was the
main person behind the INSLAW problem. " Ms. Jacobs was Judge
Jensen's secretary 1 at; the Department of Justice.

Ms. Jacobs stated that she continues to work for Judge
Jensen. When ‘Judge Jensen moved to San -Francisco in 1986
following his appointment to- the U.S. District Court for the
Northern District of. California , . Ms . i Jacobs also moved to ;
California to* continue to work for him. v; ;

Ms. Jacobs stated that the ^information contained in Mr.

i

Hamilton's affidavit is false. She said that she never told
anyone anything about INSLAW while she was at the> ^Department.
Furthermore, she said that she never told anyone that "Jensen was
the main person behind the INSLAW problem" - or anything to that

i

effect. Nor did she ever tell anyone that his -style was- to
operate using his subordinates" or anything to i that effect. She
stated .* that, to 1 ' her knowledge. Judge Jensen was hot involved in
any wrongdoing with -regard to f INSLAWi ' i

We are aware that Msv Jacobs' credibility must be viewed in

- 28 -

linking Judge Jensen to any
no reason to doubt her denial

light of Her continued employment with Judge Jensen. •
Nevertheless* in light of the failure of Mr. Hamilton's supposed
source to comie forward despite asshrances by the Attorney General
and the lack of any dthef evidence
INSLAW-related conspiracy, we find
of Mr. Hamilton's allegations.

3. Jan is: Snosato 4 * V

-INSliAW inferred from Janis Spbsato's alleged' statement that
"My management upstairs is unwilling to allow me to make any more
ooncessiotfs^-^d^l^^lfs^^SposatO'^^lreflnnring^'^td' Judge Jensen and
that Judge Jeiise'n r was therefore conspiring to ruin INSLAW and
st ea 1 the**PRGMIS - Software . ? . The only basis ‘for these*' inferences
appeals to be the’ floor plan of ths main Justice Department
building; (Ms. ; Sposato was located orcthe first floor of the
building at that time making nearly all senior management
"upstairs” from her location.) !

Furthermore / even if 'Ms i isposH to made such a statement and

I

in fact was referring to Judge Jensen (two propositions which are

* j

not supported byi 'the facts )> we fail to see what the relevance of

!

such a comment would be. INSLAW and the Department were
attempting to negotiate a resolution of some of their claims
against eea^h^d^Bfer-at^tHe time; 1 We would* expect* Her to work with

, . - ■— v- - — I • — . ... ,'i, : ■. ; . .. 1

senior 'management as the Department's positions in the

negotiations wef e formulated. The

have some interest in the matter in light of the direct request

: r jvfT- \ ; ■ v

made by INSLAW's attorneys to Judge Jensen to initiate such

. D :

fact that Judge Jensen might

discussions does not seem unusual. Furthermore, we are not
surprised that "concessions" to INSLAW during those negotiations
eventually ceased.

Nevertheless, we interviewed Ms. Sposato regarding INSLAW's
allegations. Ms. Sposato stated that she does not recall ever
making the statement INSLAW has attributed to her and that the
statement does not sound like something she would say.
Furthermore, she stated that she never received any direction on
the negotiations directly from Judge Jensen. However, she did
occasionally deal with Associate Deputy Attorney General Jay
Stephens, she stated that, to the best of her knowledge, every
time Mr. Stephens contacted her with regard to INSLAW it was in
response to a request from INSLAW. It was her impression that
Mr. Hamilton would get frustrated with the process and then ask
his attorney, former Attorney General Elliot Richardson, to
contact Judge Jensen. Mr. Stephens would inform her when such
contacts were made. Ms. Sposato stated that neither Mr. Stephens
nor Judge Jensen ever tried to directly influence the
negotiations. Rather, it was her impression that they were
trying to stay away from the discussions.

C. There Is No Credible Evidence Supporting INSLAW's

Allegations Regarding a Department of Justice/Earl Brian

C on spiras yt

INSLAW's allegations regarding Dr. Earl Brian's involvement
in a conspiracy with the Department of Justice to steal Enhanced
PROMIS fall into two categories. First, INSLAW alleges that DOJ
officials conspired with Dr. Brian, a member of Ronald Reagan's

gubernatorial cabinet along with former Attorney General Edwin
Meese, to destroy INSLAW so that Hadron, Inc., a Brian-affiliated
company, could acquire the rights to PROMIS. This conspiracy was
allegedly carried out by Hadron and affiliated companies through
a series of efforts to acquire either PROMIS or INSLAW. The
second category of allegations provides a different rationale for
the conspiracy. These allegations maintain that the Justice
Department's involvement in the conspiracy was based not simply
on a desire to award a lucrative government contract to an old
political acquaintance but on a desire to reward Dr. Brian for
the critical role he played in the October Surprise conspiracy.

The evidence that INSLAW points to as establishing the
existence of a Brian/ Justice Department conspiracy consists
primarily of the following: the fact that Dr. Brian and former

Attorney General Edwin Meese served together as members of
Governor Reagan's cabinet in the early 1970s; the testimony of
Michael Riconosciuto, Ari Ben-Menashe and Charles Hayes; a series
of suppositions involving the activities of various corporate
entities; and the alleged statements of certain unnamed sources
as conveyed by Mr. Hamilton.

After a thorough review of the Special Counsel's records,
the House Judiciary Committee records, INSLAW's submissions and
some additional investigation, we concur in the following
conclusions of the Special Counsel:

Our investigation has led us to conclude that Inslaw's
allegations. of a conspiracy to takeover Inslaw or to "get
PROMIS" involving Earl Brian and DOJ simply do not withstand
any level of scrutiny. Those individuals claiming to have

31

direct knowledge of this : conspiracy not only. are unworthy of
belief , but are contradicted by an abundance of believable
aihd verifiable evidence to the contrary.

Similarly, the claimed ''circumstantial evidence" of
such a conspiracy, as outlined by William Hamilton and
Ins law 1 s lawyers, J fallsi ‘far short of ^ being proof of
anything. !

(Bua Report 121.) These conclusions are in full accord with the

findings of the Senate Subcommittee that it could find "no proof

■ \ -V- i'.l ■ \ ~ .• :

of any connection between Brian or Hadron and the Department with

. j * ■ "■ ■ ■■. .'2? S. y " ; ■. ! i- Jrj r *.■ n. ■ ;■> ■■ - v

regard to the INSLAW contract." (Senate Staff Report 30.)

,t£; lit. ’"it. ’ '

i. Michael Riconosciuto

flKU' ’i.jj., XQ • .. • ■:

•, > ...*•%■<■ ■ -

Michael Riconosciuto is the primary source of information
allegedly linking Dr. Brian to a Conspiracy to steal PROMIS and

destroy INSLAW. He claims, among

. . i-oi. -U . ,«rr-»v

! . ■■ • . v : ....

Dr. Brian from whom he received a

personally performed alterations to the software on the Cabazon

other things: that he met with

. ■ •$#; .; j . 3 4 ¥ ' ■ , : i * . :t -i» € .' . : ■; :.i t

copy of PROMIS; that he

Indian reservation in Indio, California and elsewhere; that the

software was provided to Dr. Brian as payment for his involvement

' r> ■ »{>' : .r. 'ZtT^z rW" i ]• ' • .3 • , ; : y; : . ;

in the October Surprise conspiracy; and that he has personal

knowledge of the dissemination of

I ' ■ -J; • I K. - - * >■

around the world.

PROMIS to various entities

■■■ -tTv. 1 * 1 i„ ,■ ■ 1 r-'t- ; . ; »)

After an extensive investigation of Mr. Riconosciuto 1 s

allegations which is chronicled . in his report (Bua Report 42-73)

v.-

so-

- -;,V > .V : ■ ; y.':.T.fv. j

and supported by the records of the investigation, the Special

r V.' 3 !

f ' tied " n I T POfiXi

Counsel "found Riconosciuto to be

connection with the allegations, he has made about the alleged

/

theft 1 65THi>ROMlS sbfctWare^ about PROMTS r

• :f ;f Of- >. v.ifr.is- I’H; «ftk o.njLVl.r?vhl ; :-uS

reminds* us of a historical

4

a totally unreliable witness in

a tale df 1 total ? fictibn woven

32

against the background of accurate historical facts." (Bua Report
72. ) 6 ■ • , , ■*

; This’ conclusion was based on inconsistencies in Mr.

Riconosc iuto ' s var ious statements, regarding Dr . ? Brian 1 s
involvement f id. 42-53) /the absence of any documentary evidence
corroborating any aspect of Mr. Riconosciuto's ^claims despite his
repeated assurances that such evidence existed and ; that he would
provide. the sane to investigators f id. 68-71) 7 , and the failure

of any of then witnesses interviewed by the Special Counsel to
corroborate any of his allegations regarding Dr. Brian, f id. 53-
66.) None of the individuals interviewed by the Special Counsel,
as a> result of Mr*;, Riconosciuto's statements — Peter Zokosky, A.
Robert Frye, John Philip Nichols, , Peter Videnieks, .Earl Brian,

Material banned Poiw»ot

Art Welmas, Sam Cross, wiuiU^ofFed.R- Dave Baird,, Wayne Reeder,

Crist- Iw.

Scott Westley' and several others — were able to corroborate any
of his allegations of { a conspiracy.. (See Bua Report 53-66. )

6 The« Investigative Report of the House .Committee on the
Judiciary did not express an opinion about Mr. Ricorisociuto's
credibility* -H.qwevor, .it does no^e that he "could not, provide . ,
evidence other than his eyewitness account that Dr. Brian was
invc&ved xin tthe ^PROMTS scoi^ea^si^j^t thes»res^rvation. ", . (House
Report 72.) In light of Dr. Brian's denial of Mr'." Riconosciuto's
charges ,• , .rthe^ iftommijttse.e concluded that; it, -was "nothin, a position
to make findings of fact on Dr. Brian's role, bVt would strongly
recommend'' further ^investigation . -- f id. ) , Vl . ; , { .

■a. 7 i There .was one document ref erred- to , in,. the House Report: a

Riverside, California police report indicating tliat Dr. Brian was
present .^at ra < efeaoti^g ^demonstration Indio , pal if ornia in

September 1981. As reflected in the Special (Counsel's report,
the document was ^prepared . : in October 1991 , ten years ,efter the .
event it describes, and was based! almost solely on statements
provided i to ithe/lliyersidexpolice by-Mr. Riconosc iuto in October
1991. (Bua Report 61 - 66 .)

•J. 1 ’

The conclusion is further supported by the finding of the
Congressional Task Force to Investigate Certain Allegations
Concerning the Hbldihg of -Arier i'can Hostages by Iran in 1980 that
there is no credible evid§nd6 is supporting the basic premise of. Mr.

s a

s§ That is* the Congressional Task

Force found' no credible'' evidence ,

dur ing* a year long

investigation , * Of ' any attempt 1 by the Reagan presidential * campaign
or persons ‘associated with the campaign to delay the release of

i

the Abeticah hosta%feS in Iran 1 during the 1980 catapaign* (Joint
Report oi the 1 Task Force to' Investigate Certain! Allegations

n Hostages by Iran - in 1980

i

Report"} , Jan. 3, 1923, p. 5.)- If
supporting the existence of an ^
jonbsdiuto's claims that the
Reagan Administration entered into a conspiracy With Dr. Brian in
order to reward him’f Or his involvement in the OCtober^Surprise

I

conspiracy are obviously called into question.

Concerning the Holding 6ft AMi&icaf
( "October SurprS'&e' TaSk
there iS no credible
October Surf>r i seP bon spir acy , ' Mr .

Finally, it should be noted

/ A- ; • v'-T? i. . Tri. r *. t; ;

INS IJ^W-'r'eidt ed cla t ibi , havfe already' been heard and -rejected -by a

t.lfVt

federal Oburt . '2 c l’n‘

■ ! "f C v ;

1 *7

V Mr .

that many of Mr. RieOnoseiuto • s

-tM r

on dTUg charges arising 3 from bis

was

It

and "convicted

"Of

methamphetamine . (His involvement with i drugs dates at ile'Sst back

to" 19 7 2 When h e l Was^ bonvict ed e bn

*?.» ti-i . tWfr- p'S ■> ' ; •; -• .J

to 30

during

' ;t

- l ii l . • *.* •

f L ’

«?

he was

gove^ahent effort to keep the truth about the I-NSLAW bf fair from

PCP charges.) s He Was sentenced

7 ; j '-rv .* * i {

Mr/ unsuccessf ully defended %imsel*f-

&£ , l ^ r

as >artOf S '.

i. n -t" .

- 3j4 —

becoming public. 1 During the sentencing hearing, U.S. District
Court Judge Robert J. Bryan spoke to Mr. Riconosciuto about his
credibility:

I think you have a loose connection with the
truth, and I think all these things we have
heard about over the course of this
proceeding it [sic] is very hard to determine
what is truth and what is fiction, and I'm
not at all satisfied that you know the
difference yourself in regard to a lot of the
things that have been discussed.

( United States v. Riconosciuto . No. CR91-1034B (W.D. Wash.),

transcript of Sentencing Hearing, May 7, 1992, pp. 37-38.) The

Court arrived at the same assessment of his credibility as the

Senate investigators, Judge Bua and this report.

In its Analysis and Rebuttal of the Bua Report, INSLAW
argues that Mr. Riconosciuto' s statements are not necessarily in
conflict, that certain of the witnesses interviewed by the
Special Counsel with intelligence backgrounds cannot be expected
to tell the truth unless put under oath, and that the credibility
of certain witnesses is called into question in light of various
charges made against those witnesses. (INSLAW Rebuttal 49-54.)
After carefully considering INSLAW's comments and acknowledging
that the assessment of the credibility of certain witnesses must
take into account their previous or current troubles with law
enforcement authorities, we continue to find Mr. Riconosciuto to

* As noted in the Special Counsel's report, "[T]he evidence
against Riconosciuto at trial was overwhelming. The DEA in that
case captured Riconosciuto delivering methamphetamine on
videotape on more than one occasion. The testimony also
established that Riconosciuto was running a large methamphetamine
lab at the property where he was living." (Bua Report 67.)

35

be a wholly unreliable witness.

2 . Ari Ben-Menashe

The second major source of information linking Dr. Brian to
a conspiracy with Department of Justice officials and others to
steal and then distribute internationally INSLAW's PROMIS
software is Ari Ben-Menashe, who claims to be a former high-level
Israeli intelligence officer. In 1992, Mr. Ben-Menashe published
a book, Profits of War? Inside the Secret U.S. - Israel Arms
Network (Sheridan Square Press, New York 1992), detailing his
alleged involvement in various covert operations, including the
October Surprise, arms sales to Iraq, the Iran Contra affair and
others. In that book and in various statements he has made, Mr.
Ben-Menashe claims to have first-hand knowledge that Dr. Brian
and Robert McFarlane, the former National Security Adviser,
provided Enhanced PROMIS to Israel. He claims to have either
first or second hand information concerning the sale of PROMIS to
the Singapore Armed Forces, Jordanian military intelligence
organizations, Iraq, the Soviet Union and Canada. (See, e.a. .
House Report 64.) Mr. Ben-Menashe also claims that certain
Israeli officials would be able to corroborate his allegations
although he refuses to identify those officials.

Despite the concerns raised by INSLAW regarding the
credibility of Dr. Brian's and of Mr. McFarlane' s denials of Mr.
Ben-Menashe 1 s allegations, we concur with the Special Counsel's
conclusion that Mr. Ben-Menashe ' s "testimony offers no support
for the allegation that DOJ and Earl Brian conspired to steal and

36

distribute the software in which Inslaw claims proprietary
rights.” (Bua Report 81.) We base this concurrence primarily on
the factors identified below as well as on the other factors
identified in the Special Counsel's report.

First . Mr. Ben-Menashe ' s credibility has already been called
into serious question by two congressional investigations. The
October Surprise Task Force, led by Chairman Lee H. Hamilton and
Congressman Henry J. Hyde, conducted a thorough investigation of
the allegations that the Reagan campaign acted to delay the
release of American hostages held in Iran until after the 1980
election. The Joint Report of the October Surprise Task Force
reached the following conclusions about Mr. Ben-Menashe 1 s
allegations concerning the alleged October Surprise conspiracy,
many of which also form the basis of his INSLAW testimony:

Credible testimonial and documentary evidence show Ben-
Menashe to be totally lacking in credibility regarding his
allegations about meetings in Spain in 1980 ... Aside from
early biographical details, virtually everything Ben-Menashe
told the Task Force has been found to be false, (p. 97. ) 9

According to numerous pieces of documentary evidence,
Ben-Menashe ' s account is demonstrably false from beginning
to end. (p. 110.)

Ben-Menashe ' s testimony is impeached by documents and
is riddled with inconsistencies and factual misstatements
which undermine his credibility. Based on the documentary
evidence available, the Task Force has determined that Ben-

9 Among the facts that the Task Force found to be false was
the existence of a relationship between Mr. Ben-Menashe and Rafi
Eitan. The report indicates that Mr. Eitan claims he does not
know Mr. Ben-Menashe and has never met him. f id. 97.) This is of
particular relevance to the INSLAW allegations as Mr. Ben-Menashe
claims that Mr. Eitan provided much of his information to him and
that Mr. Eitan was a key player in the misappropriation of
PROMIS.

37

Menashe's account of the October meetings, like his other
October Surprise allegations, is a total fabrication, (p.
148 . )

The Task Force also concluded, "There is no credible evidence
supporting any attempt, or proposal to attempt, by the Reagan
Presidential Campaign — or persons representing or associated
with the campaign — to delay the release of the American
hostages in Iran." (October Surprise Task Force Report 8.)

The Special Counsel appointed by the Subcommittee on Near
Eastern and South Asian Affairs of the Senate Committee on
Foreign Relations to investigate the October Surprise
allegations, Reid H. Weingarten, reached similar conclusions
regarding Mr. Ben-Menashe* s credibility. In his report, he
found:

The primary sources for this allegation — Brenneke,

Ben Menashe, and Lavi — have proven wholly unreliable.

Their claims regarding alleged secret meetings are riddled
with inconsistencies, and have been contradicted by
irrefutable documentary evidence as well as by the testimony
of vastly more credible witnesses. Not one aspect of Ben-
Menashe's story, which alleges a series of meetings in
Madrid, Amsterdam, Paris and Washington in furtherance of an
"October Surprise" conspiracy promoted by Israel, was ever
corroborated ... In sum, the Special Counsel found that by
any standard, the credible evidence now known falls far
short of supporting the allegation of an agreement between
the Reagan campaign and Iran to delay the release of the
hostages .

(The "October Surprise" Allegations and the Circumstances
Surrounding the Release of the American Hostages Held in Iran,
Report of the Special Counsel, November 19, 1992, pp. 114-115.)
Second .

Material Omitted Pursuant to
Rule 6(e) of Fed. R. Crim. Proc.

38

Material Omitted Pursuant to
Rule 6(e) of Fed. R. Crim. Proc.

39

Material omitted Pursuant to
Rule 6(e) of Fed. R- Crim. Proc.

10

10 The description of the contract dispute between INSLAW
and the Department of Justice contained in Mr. Ben-Menashe * s book
is demonstrably false. For example, Mr. Ben-Menashe writes,
"Hamilton and his wife Nancy sued the Justice Department,
charging that Justice stole the enhanced PROMIS program from
INSLAW and gave it to NSA. Justice claimed it did get a program
from INSLAW but returned it unused." Profits of War , p. 131.
Furthermore, his description of the power of the PROMIS program
as "Big Brother-like" and a "monster" does not comport with
reality. He describes the use of the software as follows:

Using a modem, the spy network would then tap into the
computers of such services as the telephone company, the
water board, other utility commissions, credit card
companies, etc. PROMIS would then search for specific
information. For example, if a person suddenly started
using more water and more electricity and making more phone
calls than usual, it might be suspected he had guests
staying with him. PROMIS would then start searching for the
records of his friends and associates, and if it was found
that one had stopped using electricity and water, it might
be assumed, based on other records stored in PROMIS, that
the missing person was staying with the subject of the
investigation. This would be enough to have him watched if,
for example, he had been involved in previous conspiracies.

( Profits of War 131-132.) PROMIS is a case tracking software
program used to index relevant information on pending cases. The
suggestion that it could be used to "'keep track of everyone'" is

40

Fourth . neither the House investigation nor the Special
Counsel's investigation was able to uncover any credible evidence
corroborating any aspects of Mr. Ben-Menashe ' s story. Mr. Ben-
Menashe repeatedly promised House investigators that he would
provide documentary evidence relating to the sale of PROMIS
software and demonstrating the participation of Dr. Brian in
those sales. He failed to produce any such documents or any
corroborating witnesses. Finally, during his sworn statement to
House investigators, he stated that he would not make that
documentation available or identify those witnesses until he was
"called as an official witness." He proved to be equally
unforthcoming with the Special Counsel. Although the Special
Counsel subpoenaed the relevant records in Mr. Ben-Menashe ' s
possession, he never produced any documents. (Bua Report 78.)

In light of these factors, there is no reason to give any
weight to Mr. Ben-Menashe' s allegations.

3 . Charles Haves

INSLAW also relies heavily on the statements of Charles
Hayes, a Kentucky salvage dealer who claims to have purchased
word processing equipment that contained Enhanced PROMIS from a
local United States Attorney's office. He also "previously told
Mr. and Mrs. Hamilton that he met with Earl Brian, Richard Secord
and Oliver North in Sao Paulo, Brazil, in the mid-1980's while
those three individuals were purchasing weapons for the Contras
in Nicaragua, and Brian was marketing INSLAW's PROMIS software to

patently absurd.

41

;he government of Brazil." (INSLAW Rebuttal 55.)"
The Special Counsel concluded as follows:

Material Omitted Pursuant to
Rule 6(e) of Fed. R. Crim. Proc.

(Bua Report 85.) Mr. Hayes had also failed to provide any
documentation corroborating his allegations to House
investigators. (House Report 66.)

INSLAW, which has not had the benefit of reviewing Mr.

Hayes' grand jury testimony, is critical of the Special Counsel's
conclusions based in large part on a statement allegedly signed
by Mr. Hayes regarding the content of his grand jury testimony.
After carefully reviewing Mr. Hayes' sworn statements to the
Special Counsel's grand jury and to House investigators as well
as the Special Counsel's analysis and INSLAW's rebuttal, we
concur with the findings of the Special Counsel.

Material Omitted Pursuant to
Rule 6(e) of Fed. R. Crim. Proc.

42

4 . Circumstantial Evidence of a Conspiracy

In addition to the witnesses identified above, INSLAW points
to a series of events involving various corporate entities and
their principals as evidence of a conspiracy involving Dr. Brian
and Justice Department officials to steal the PROMIS software.
These allegations, which are set forth in detail in Mr.

Hamilton's December 22, 1989 affidavit, can be summarized as
follows:

(1) Starting in 1983, Hadron, Inc., a company owned by Dr.
Brian, attempted to obtain the PROMIS software through a variety
of different strategies. Mr. Hamilton identifies two alleged
acts that directly involve Hadron as proof of its involvement in
this alleged conspiracy. First, Mr. Hamilton claims that he
received a telephone call from Dominic Laiti, chairman of Hadron,
shortly after Modification 12 to the PROMIS contract was agreed
to in which Mr. Laiti inquired as to whether INSLAW was
interested in selling its rights to PROMIS. Among other things,
Mr. Hamilton claims, "When I declined to meet with Laiti to
discuss his proposition, Laiti said: 'We have ways of making you
sell.'" (Hamilton 12/22/89 Decl. 8.) Second, Mr. Hamilton
alleges that a 1983 trip to New York involving various Hadron
officials was for the purpose of raising funds to acquire PROMIS.

(2) Mr. Hamilton alleges that individuals involved with
53rd Street Ventures, a New York venture capital fund with a
small equity interest in INSLAW, were attempting to acquire
INSLAW or PROMIS on behalf of individuals with "ties at the

43

highest level of the Reagan Administration.” (Hamilton 12/22/89
Decl. 13.) These assertions are based largely on Mr. Hamilton's
account of two conversations he allegedly had, one with Jonathan
Ben Cnaan, an account executive for the fund, and the other with
Daniel Tessler, the chairman of the company that managed the
fund.

(3) Mr. Hamilton also alleges that the Justice Department
encouraged a 1986 hostile takeover bid initiated by Systems and
Computer Technology, Inc. ("SCT") "in order to preclude INSLAW
from seeking redress in the courts for DOJ's 1983 theft of the
PROMIS software and to remove INSLAW as an obstacle to the
planned award of Project EAGLE to Tisoft and the planned
implementation of PROMIS on the Project EAGLE computers." (INSLAW
Rebuttal 61.) 12

The Special Counsel spent a considerable amount of time
investigating these allegations. He summarized the results of
that effort as follows:

We tried to interview virtually all of the witnesses
identified in Mr. Hamilton's affidavit and in the memoranda
submitted by Inslaw's lawyers as supporting these claims.

As is described in detail in the following pages, we found
that many of the witnesses deny making the statements
attributed to them by Mr. Hamilton. In other cases, the
individuals confirmed the particular statements attributed
to them, but then admitted that they were only repeating
things that other people had told them. In the end, we
found that much of the supposed "circumstantial evidence"
identified by INSLAW does not in fact exist, and that what

12 INSLAW and Mr. Hamilton make additional allegations
involving Edward Hurley, a Hadron vice president, and a contract
award to a Hadron subsidiary. These charges are fully and
adequately addressed in the Special Counsel's report and do not
warrant additional comment here. (See Bua Report 98-101.)

44

does exist is woefully insufficient to support a finding of
a conspiracy, or, indeed, any connection between INSLAW and
PROMIS on the one hand, and Hadron or Earl Brian on the
other.

(Bua Report 86.)

(a) Evidence of Direct Hadron Involvement
The two individuals identified by Mr. Hamilton — Paul
Wormeli and Marilyn Titus — as the source of his information
regarding the 1983 fundraising trip to New York informed the
Special Counsel that they have no reason to believe that the
purpose of the trip was to raise funds to purchase PROMIS as
alleged by Mr. Hamilton. ( See Bua Report 88-90.) Mr. Hamilton
stated in his affidavit that Ms. Titus, a secretary to Mr.
Wormeli, had informed him that the "purpose of the trip was to
•raise capital for the court f i. e. , PROMIS] software.'" (Hamilton
12/22/89 Decl. 13.) However, Ms. Titus informed the Special
Counsel that she "had never heard any discussion at all about
Hadron obtaining PROMIS software, and she does not believe that
she ever told William Hamilton that the purpose of the 1983 fund
raising trip was to raise capital to obtain PROMIS or Inslaw."
(Bua Report 90.)

Furthermore, Mark Kesselman (with whom Mr. Laiti and Mr.
Wormeli met during their trip to New York) was unable to support
Mr. Hamilton's charges. Mr. Laiti informed the Special Counsel
that the 1983 New York trip had nothing to do with acquiring
INSLAW or PROMIS and that he had no recollection of any efforts
to acquire either the company or the software. He also stated
that he did not recall ever talking to Mr. Hamilton, let alone

45

threatening him. Dr. Brian also denied any knowledge of any
effort by Hadron to acquire INSLAW. Finally, Donald Stromberg, a
former president of Simeon, informed Senate investigators that he
never heard mention of either INSLAW or Mr. Hamilton while he was
at Simeon. (Senate staff Report 30.)

in light of the fact that the only "evidence” of a direct
involvement by Hadron or its principals in an alleged conspiracy
is Mr. Hamilton's sworn affidavit and that the alleged sources of
the information reflected in that affidavit have disavowed its
accuracy, we concur with the finding of the Senate staff that
there is "no proof that officials of Hadron, Inc. were involved
in a conspiracy with officials of the Department of Justice to
undermine INSLAW in order to acquire its assets." (Senate Staff
Report 28 . )

(b) 53rd Street Ventures

INSLAW is particularly critical of the special Counsel's
conclusions regarding the alleged involvement of 53rd Street
Ventures in an effort to acquire INSLAW. INSLAW's criticisms
focus on the Special Counsel's failure to interview Jonathan Ben
Cnaan and the Special Counsel's willingness to accept the unsworn
statements of Daniel Tessler, the chairmen of 53rd Street
Ventures; Patricia Cloherty, Mr. Tessler 's wife; and Richard
D'Amore, a partner at Hambro international, another venture
capital firm; over Mr. Hamilton's sworn testimony.

According to Mr. Hamilton's affidavit:

Jonathan Ben Cnaan, an account executive with 53rd street

Ventures, a New York City venture capital firm that then had

46

a small equity investment in INSLAW, described a meeting in
September 1983 at 53rd Street Ventures with a "businessman
with ties at the highest level of the Reagan Administration"
who was eager to obtain the PROMIS software for use in
federal government work. The meeting took place several
months after the contract disputes with DOJ had emerged, and
the businessman assured 53rd Street Ventures that INSLAW
would never be able to resolve them. According to Ben
Cnaan, the businessman was annoyed that I had rebuffed an
attempt earlier that year to buy INSLAW in order to obtain
title to the PROMIS software.

(Hamilton 12/22/89 Decl. 13.) Despite efforts made by the
Special Counsel, he was not able to locate Mr. Ben Cnaan. (Bua
Report 97-98.)

With the aid of INSLAW and an Israeli journalist, we were
able to locate Mr. Ben Cnaan in Israel. We interviewed him by
telephone.

Mr. Ben Cnaan, a native of Israel, stated that he was
employed by Allen Patricof and Associates ("APA") in New York
from 1981 to 1987. 53rd Street Ventures was one of the venture
funds which he helped to manage while at APA. He stated that the
first investment he made for APA was a $100,000 investment in
INSLAW. He said that he was a "follower" investor and did not
take an active role in the negotiation of the deal.

Mr. Ben Cnaan stated that he never met with anyone with ties
to high level officials of the Reagan Administration and that he
never had any conversation with anyone regarding the government's
alleged desire to obtain PROMIS. Furthermore, he stated that he
had no reason to believe that the federal government had any
desire to obtain the PROMIS software. He also said that he had
no recollection of any of the events described in the above-

47

excerpted paragraph from Mr. Hamilton's declaration. Mr. Ben
Cnaan denied that anyone ever told him that INSLAW would be
unable to resolve its conflicts with the government. He also
denied that he was ever told that someone was annoyed that Mr.
Hamilton had rebuffed an earlier attempt to purchase INSLAW.

Mr. Ben Cnaan called the allegations contained in Mr.
Hamilton's declaration ''fabrications' 1 and the result of a
"creative imagination."

Mr. Hamilton also claims that Mr. Tessler attempted to
coerce him into turning over control of INSLAW and that his wife,
Patricia Cloherty, informed Mr. D'Amore that she "knew all about"
Dr. Brian's role in the INSLAW matter. (Hamilton 12/22/89 Decl.
13-14.) He also asserts that Daniel Tessler is a relative of
Alan Tessler, an attorney responsible for the mergers and
acquisition work of Dr. Brian and Hadron. Mr. Tessler, Ms.
Cloherty and Mr. D'Amore all denied these accusations during
interviews with the Special Counsel. (Bua Report 91-96.) Mr.
Tessler also stated that he was not related to Alan Tessler.

Nevertheless, INSLAW argues that these individuals are not
credible. Specifically, INSLAW asserts that Mr. Tessler 's
statement that "to his knowledge, his wife, Patricia Cloherty,
has no knowledge of Earl Brian" and Ms. Cloherty 's subsequent
statement that she once served on the board of the National
Association of Small Business Investment Companies with Dr. Brian
indicate their lack of trustworthiness. (INSLAW Rebuttal 58.)

We disagree. We do not find it particularly unusual that an

48

individual would not know all the business associates of his or
her spouse. Furthermore, even if Mr. Hamilton's statements are
true, it would not connect either Dr. Brian or Hadron to any
wrongdoing in connection with INSLAW or PROMIS.

(c) Systems and Computer Technology. Inc. f'SCT'M
The Special Counsel reviewed in detail the events
surrounding a 1986 effort by SCT to purchase INSLAW from the
Hamiltons. (Bua Report 104-106.) A review of the Special
Counsel's report and the memoranda memorializing interviews
conducted with key SCT officials reveals that none of those
involved with the attempted purchase were aware of any connection
between either the Justice Department or Dr. Brian, on the one
hand, and SCT's efforts to purchase INSLAW, on the other.

Nevertheless, INSLAW continues to assert that SCT was acting
in union with Dr. Brian and the Department when it approached
INSLAW. However, the "support" for this accusation contained in
INSLAW's Rebuttal is nothing more than a series of
unsubstantiated beliefs which INSLAW does not even attempt to
corroborate :

INSLAW believes that the PROMIS software was intended
by DOJ to be the uniform case management software for the
Project EAGLE computers. INSLAW further believes that Earl
Brian's Hadron, Inc. was originally slated to receive the
Project EAGLE contract award by DOJ as a sweetheart gift
from Brian's long-time friend, then Attorney General Meese.
INSLAW believes that Brian and DOJ abandoned the plan to use
Hadron as the vehicle for the contract in the fall of 1985,
following the failure of the covert DOJ effort to force
INSLAW's liquidation.

INSLAW believes that, by January 1986, Brian and DOJ
had substituted Tisoft, Inc. as the vehicle for the planned
sweetheart Project EAGLE award. That month, Tisoft was

49

awarded a $30 million computer systems contract by Meese's
Justice Department, and Tisoft amended its articles of
incorporation to permit the sale of common stock to new
outside owners who would then have majority control of the
company .

Margaret Wiencek, the former Director of Administrative
Services at Earl Brian's Financial News Network (FNN) ,
claims that Patrick R. Gallagher of Tisoft, Inc. was also
someone who regularly telephoned the chairman's office at
Earl Brian's FNN Headquarters in Los Angeles during at least
1987.

INSLAW believes that DOJ encouraged the SCT hostile
takeover bid for INSLAW in 1986 in order to preclude INSLAW
from seeking redress in the courts for DOJ's 1983 theft of
PROMIS software and to remove INSLAW as an obstacle to the
planned award of Project EAGLE to Tisoft and the planned
implementation of PROMIS on the Project EAGLE computers.

(INSLAW Rebuttal 60-61 [emphasis added].) This is pure

conjecture on the part of INSLAW.

Furthermore, House investigators interviewed several

individuals involved with the EAGLE contract to determine if

there was any link with INSLAW of the type alleged by INSLAW.

Based upon our review of those interviews, there is no

substantial evidence suggesting such a link. Similarly, the

report of the Senate staff study "found no proof that INSLAW's

problems with the Department were connected to the Department ' s

•Project EAGLE' procurement." (Senate Staff Report 31.)

5. John A. Belton

In its Analysis and Rebuttal of the Bua Report, INSLAW is
critical of the Special Counsel for failing to interview John A.
Belton, a former Canadian stockbroker, who has apparently been
investigating the alleged illegal distribution of PROMIS in
Canada and the role of Dr. Brian and Hadron in that distribution.

50

According to INSLAW, the June 10, 1993 memorandum from Mr. Belton
to Mr. Hamilton, which is attached as Exhibit A to INSLAW's
Rebuttal, ''documents the existence of a business relationship
between Earl Brian's Hadron, Inc., and two Canadian computer
services companies on a large [PROMIS] software sale to the
Government of Canada in 1983." (INSLAW Rebuttal 38.)

We spoke with Mr. Belton by telephone. According to Mr.
Belton he was employed by Nesbitt, Thomson, Bongard, Inc.

("NTB"), a Canadian investment bank, from 1968 to February 26,
1982. He stated that he left NTB in 1982 following his
discovery that NTB was involved in securities fraud with Dr.

Brian and others. He has subsequently filed two suits against
NTB, both of which are still pending. The suits apparently focus
on the alleged securities fraud and include a claim for
constructive dismissal. Mr. Belton stated that both suits should
be settled shortly. Since leaving NTB, he has spent a majority
of his time investigating his claims and prosecuting his cases.

Mr. Belton stated that he was aware of several sales of
PROMIS to various entities by Dr. Brian or others involved in the
"intelligence community." He stated that Dr. Brian was
responsible for selling the "U.S. version" of the software
through Hadron, Inc. , while Robert Maxwell, the late British
publisher, was responsible for selling the "Israeli version" of
the software. According to Mr. Belton, Dominic Laiti, the
president of Hadron, Inc., is a full-time employee of the Central
Intelligence Agency, and Hadron was a CIA "cut-out." He also

51

claims that Janos Pasztor, vice-president of NTB, was a CIA
agent. "Reliable sources" also allegedly informed Mr. Belton
that Dr. Brian has acted as an agent of the National Security
Agency.

Mr. Belton alleges that Dr. Brian and an NTB official sold
PROMIS to the Bank of Montreal for $2 million in May 1987. He
stated that he has first-hand knowledge of this sale although he
refused to explain how he came to have that knowledge. Mr.

Belton also claimed to have a document that reflects the sale;
however, he said that he would not provide that document to
anyone at this time. He stated he feels that he should not
release any documents or further information about this sale
until after his lawsuits have been settled.

Mr. Belton also claims that a sale of PROMIS was made to a
Nuclear Regulatory Commission facility in New Mexico in 1983. He
believes the facility was Los Alamos. According to Mr. Belton,
the sale was made by Trans World Arms in Montreal and ORA. ORA
is allegedly the Israeli half of a multi-billion dollar slush
fund made up of Israeli and U.S. funds. Mr. Belton stated that
the fund has been used, among other things, to fund arm sales to
Iraq. He stated that his primary source of information
concerning this sale was Mr. Hamilton. However, he claims that
he confirmed Mr. Hamilton's allegations with a "very, very
reliable source." He refused to identify that source.

Mr. Belton alleges that this same source informed him that
the Canadian security Intelligence Service purchased $10 to 12

52

million worth of PROMIS software in 1984. Again, he refused to
identify the source or to provide any additional evidence of such
a sale.

During our conversation, Mr. Belton claimed to have
information about other sales of the PROMIS software. However,
he was unable to supply any potentially corroborating information
with respect to any of those alleged sales. He also claimed that
he learned from a reliable source that former President George
Bush put NTB and the Bank of Montreal under CIA control in 1976
while Bush was the Director of the CIA. He also claims that he
is in the process of negotiating the return of $590 million to
the pensioners of Mirror Newspapers in London. Mr. Belton also
claims to have reliable information regarding conspiracies
involving Robert Maxwell, Iraqi arm sales, Iranian arm sales and
the October Surprise.

We found Mr. Belton to be unbelievable. He merely made a
number of accusations based on unnamed "reliable" witnesses while
refusing to identify those sources or provide any documentary
support for those allegations. His claim that such documents
exist but that he does not want to release them to us detracts
rather than adds to the credibility of his allegations.
Furthermore, he seemed to be a man dedicated to prevailing on his
suits against his former employers.

6. The Alleged Videnieks /Hadron Connection

INSLAW has also asserted that the Justice Department's
contracting officer, Peter Videnieks, had a relationship with

53

Hadron, Inc. , and its officers and asserts that relationship as
further evidence of a conspiracy involving Dr. Brian and the
Department. INSLAW's allegations have centered on the statements
of two individuals. First . INSLAW focuses on the statements of
John Schoolmeester , a former Customs Service employee. Mr.
Schoolmeester asserts that when Mr. Videnieks was employed at
Customs prior to moving to the Department of Justice, he handled
some contracts between Customs and Hadron. Mr. Schoolmeester
informed the Special Counsel that Mr. Videnieks almost certainly
would have met Dominic Laiti, Hadron's president, around that
time as Mr. Laiti "met everyone in government." in light of Mr.
Schoolmeester ' s admission that he has no first-hand knowledge
that Mr. Laiti and Mr. Videnieks ever met, the investigation
conducted by the Special Counsel and a review of Mr.

Schoolmeester ' s 1991 statement to House investigators, we concur
with the Special Counsel's conclusion that this allegation "falls
far short of anything that could fairly be called evidence of a
conspiracy." (Bua Report 104.)

Second . INSLAW points to the sworn statement of Margaret
Wiencek, a former employee of Dr. Brian's Financial News Network,
obtained by investigators for the U.S. Customs Service Internal
Affairs Division in February 1993. In that statement, Ms.

Wiencek states:

4. Peter Vedinecks [sic] and Michael Riconisuitto [sic]

(as I am unaware of the proper spelling of these
individuals' names, I have spelled them phonetically as I
would have done on any phone log when uncertain of the
spellings of names) were individuals who made several phone
calls to FNN during the first quarter of 1987 asking for Mr.

54

Bolen [FNN's chief financial officer] and/or Dr. Brian and
leaving messages for Mr. Bolen and/or Dr. Brian requesting
that Mr. Bolen and/or Dr. Brian return calls...

5. In the course of my official duties, I became aware of
a file in Mr. Bolen's office marked M.I.S. that contained
copies of correspondence relating to the PROMIS computer
software product. Dominic Laiti, then CEO of Hadron, Inc.,
a company controlled by Dr. Earl W. Brian through
Infotechnology , Inc. was either the author or recipient of
the letters in question in this file. . .

(Wiencek, 2/7/93 p.l.) It is unclear whether the Special Counsel

investigated these allegations.

Our investigation, however, has identified several factors

that cast doubt on Ms. Wiencek 's credibility. First, Ms. Wiencek

has filed suit against Dr. Brian and FNN charging, among other

things, that she was improperly discharged from her position with

FNN in 1990 as a result of her refusal to participate in

wrongdoing taking place at FNN. Ms. Wiencek stated that she has

been laid off from several jobs since 1990 and is currently

unemployed. She is representing herself in the litigation.

Second ,

Material Omitted Pursuant to
Rule 6(e) of Fed. R. Crim. Proc.

55

Third, the customs Service Internal Affairs Division has
indicated their intention to close their two-year investigation
into allegations that Peter Videnieks committed perjury at the
trial of Michael Riconosciuto when he testified that he did not
know Dr. Brian due to a lack of credible evidence supporting
those allegations. 13 According to Customs Service investigators,
the investigation was initiated as the result of information
received by an informant. The informant alleged that Mr.
Videnieks committed perjury when he denied knowing Dr. Brian and
others during the trial of Mr. Riconosciuto on drug charges. Mr.
Riconosciuto unsuccessfully defended himself in that litigation
by claiming that he was framed by the government as part of a
greater iNSLAW-related conspiracy. Due to the fact that Mr.
Videnieks had returned to Customs after leaving the Justice
Department and was a Customs employee at the time he testified at
trial the anonymous charges against Mr. Videnieks were
investigated by Customs Service internal Affairs . Despite Ms.
Wiencek's signed statement, the Customs Service investigators
concluded, after what they described as an extensive
investigation, that there was no credible evidence that Mr.
Videnieks committed perjury when he denied knowing Dr. Brian.
Despite promises by Mr. Riconosciuto and his former girlfriend to

13 The Customs Service's intention to close the investigation
was conveyed to us in a telephone conversation with Customs
Service Office of Internal Affairs Regional Director William
Rohde and Deputy Director John Kelly on March 30, 1993.

According to Mr. Rohde, his office intends to prepare a detailed
report of their investigation over the next few months.

56

Customs investigators that they would provide physical proof that
Mr. Videnieks and Dr. Brian knew each other, they failed to
produce any such evidence. 14

And fourth, Ms. Wiencek contradicted two important details
contained in her written statements and in her sworn statement to
House investigators during an interview pursuant to this review.
During that interview, Ms. Wiencek stated that while she was
organizing files at FNN she discovered an unlabelled file that
contained promotional material regarding a software program
called PROMIS. She then went on to state that she put the
material in another file and labelled it "MIS" as she understood
the PROMIS software to be a management information system. We
asked her several times whether the file was labelled at the time
she found it, and on each occasion she stated that the file was
unlabelled and that she was the one to label it "MIS." In both
her signed statement to Customs investigators and her sworn
statement to House investigators, Ms. Wiencek stated that the
file was already marked "MIS" when she found it.

The second inconsistency involves her testimony concerning
the contents of that file. During our interview, Ms. Wiencek

14 Assistant United States Attorney Marc Bartlett was the
lead prosecutor in the case against Mr. Riconosciuto. Mr.
Bartlett informed us that he believed Mr. Videnieks' testimony
during the trial was truthful. In the government's Sentencing
Memorandum, it stated the following: "Regardless of the cause,
the [Riconosciuto 's] lies have wreaked havoc on numerous fronts.
At an individual level, people such as Peter Viedinicks [sic]
whose names were included in the defendant's seamless web of lies
and paranoia have suffered countless personal and professional
problems." United States v. Riconosciuto . No. CR91-1034B (W.D.
Wash.), Government's Sentencing Memorandum, April 29, 1992, p. 3.

57

stated that there were two to four letters included with the
promotional material in the file. She stated that one letter
appeared to be from the federal government as she recalls seeing
"United States Government" at the top of the letter. The only
other letter she specifically recalled was one that she believed
was from Hadron, Inc. She specifically stated that the letter
did not have any other names on it and that the letter was not
from Dominic Laiti. She also stated that she did not recall
seeing any letter in the file with Mr. Laiti' s name on it.
However, in her statements to House investigators and to Customs
investigators, Ms. Wiencek stated that Mr. Laiti was either the
author or the recipient of the letters in question.

Even if Ms. Wiencek 's statements were true, we believe that
they are insufficient in conjunction with the other evidence
reflected in this report and the Special Counsel's Report to be
considered significant evidence of a conspiracy. Furthermore, in
light of the discussion above and the repeated denials of both
Dr. Brian and Mr. Videnieks, we believe that her statements lack
credibility.

7 . Conclusions Regarding a Brian /DOJ Conspiracy

Based on our review of all of the INSLAW allegations
concerning a conspiracy between Dr. Brian and Hadron, Inc. , on
the one hand, and the Department of Justice, on the other, to
acquire PROMIS or to destroy INSLAW, we conclude that there is no

58

This conclusion is in

credible evidence of such a conspiracy. 15
accord with the conclusions of both the Special Counsel (Bua
Report 121-123) and the Senate Staff Report (Senate Staff Report
p. 30) .

D. There Is Insufficient Evidence to Conclude that INSLAW's

PROMIS Has Been Distributed by the Department of Justice to
Other Agencies or Departments of the U.S. Government.

1. There Is No Evidence that The FBI's FOIMS System Was
Pirated From or Based on PROMIS.

a. The Allegations.

Since 1991, INSLAW has repeatedly asserted that the Federal
Bureau of Investigation installed and is running PROMIS under the
name Field Office Information Management System ("FOIMS") . These
allegations are based primarily on two sources of information:
Terry D. Miller, president of Government Sales Consultants, Inc.,
and an unnamed "confidential senior DOJ source" who, according to
INSLAW, claims that former Acting Director of the FBI John Otto
admitted to him that FOIMS was actually PROMIS. According to
INSLAW's theory, the FBI and DEA were each ordered by the

15 There are several additional individuals other than those
identified in this report who have been identified by INSLAW or
their sources as having first-hand knowledge of a conspiracy.

One such person is Lois Battistoni, a former employee of DOJ's
Criminal Division. The Special Counsel's investigation revealed
that she has absolutely no first hand knowledge of any relevant
events and that her leads were dead-ends. (Bua Report 106-113.)

A review of the files maintained by House investigators indicates
that they too spent a considerable amount of time speaking to
individuals identified by Ms. Battistoni without uncovering any
credible evidence that corroborates the conspiracy allegations.
The ‘information provided by INSLAW's other sources also appears
to lack credibility or is impossible to corroborate.

59

Department of Justice in 1988 to implement PROMIS and to get rid
of their then existing case tracking software.

Despite the great importance placed on these allegations by
INSLAW, there is simply no evidence that the FBI ever installed
or used PROMIS or that FOIMS is some sort of derivative of
PROMIS. (See Bua Report 141-146.) The FBI has always maintained
that it never used PROMIS and that the FOIMS system was developed
entirely in-house at the FBI. As the House Committee Report
makes clear, Mr. Miller has no first-hand knowledge of the use of
PROMIS by the FBI but has merely been repeating rumors that FOIMS
contains PROMIS software stolen from INSLAW. (House Report 60.)
Further, Mr. Otto denied that he ever said that FOIMS is PROMIS.
(Bua Report 143.) The unnamed source who allegedly heard Mr.

Otto make the admission never came forward during the Special
Counsel's investigation or during our investigation despite our
repeated requests to the Hamiltons and INSLAW's counsel to
encourage this and other alleged sources to cooperate. Finally,
the Special Counsel retained Professor Dorothy Denning, Chair of
the Computer Science Department at Georgetown University, to
compare FOIMS and PROMIS. After reviewing the functionality of
the programs, Professor Denning concluded that PROMIS, which is
written in the COBOL computer language, is so different from
FOIMS, which is written in the NATURAL/ ADABASE language, that one
could not have served as a platform for the development of the

60

other.

16 She also concluded that it was not necessary to compare

the code of the two programs. (Bua Report 145-146.)

The Special Counsel concluded that the FBI's FOIMS software

is not PROMIS or any derivative of PROMIS. The House Committee

also failed to uncover any evidence supporting INSLAW's

allegations though it recommended further investigation:

While there is no specific evidence that PROMIS is being
used by the FBI, the matter could be resolved quickly if an
independent agency or expert was commissioned to conduct a
code comparison of the PROMIS and FOIMS system.

(House Report 61.)

INSLAW is extremely critical of the Special Counsel's
analysis. (INSLAW Rebuttal 31-34.) INSLAW's principal criticism
is the failure of Professor Denning actually to compare the code
of the FOIMS program to the code of the PROMIS program. 17 It

16 The original version of FOIMS was written in COBOL.
However, according to Gordon Zacrep who has been involved in the
development of FOIMS since its earliest days in 1977, FOIMS was
rewritten in the NATURAL language beginning in 1983. Mr. Zacrep
believes the first installation of the NATURAL version of FOIMS
was in 1985. He said the system was converted to the NATURAL
language because of the greater power of that language as
compared to COBOL.

17 INSLAW also points to "possible dissembling" by the FBI as
evidence of some type of cover-up. For example, INSLAW quotes
John Maguire, the founder of the company that markets the NATURAL
programming language, for the proposition that the description of
the FOIMS system as containing 570,000 lines of code was "wrong
by an order of magnitude." (INSLAW Rebuttal 33.) However, our
discussion with Mr. Maguire revealed that his statement had been
badly misrepresented by INSLAW. He did say that he had never
heard of a single "program" with over 500,000 lines of code. He
told us that programmers typically would create large complicated
software systems by combining a large number of smaller discrete
"programs." This allows for greater ease in debugging and
otherwise managing the system. When we described the general
contours of the FOIMS system (i.e. the number of programs and the
number of lines of code) , Mr. Maguire stated that such an

61

should be noted, however, that INSLAW does not identify any
additional support for these allegations in its rebuttal papers.

b. Our Investigation Confirmed that There Is No
Relationship between FOIMS and PROMIS.

Despite the fact that there is absolutely no support for
INSLAW's claims (other than the statements allegedly made by the
anonymous source) , we made a considerable effort to investigate
INSLAW's allegations about the connection between FOIMS and
PROMIS because of the importance placed on these allegations by
INSLAW in its rebuttal papers and in correspondence with us. our
investigation confirmed that FOIMS is not in any way related to
PROMIS and that there is no evidence that PRoMIS has ever been
used by the FBI.

Our investigation proceeded on two tracks. First, we spoke
to several FBI officials with varying degrees of involvement in
the development and operation of the FOIMS system over the years.
We also reviewed documents made available to us by the FBI
regarding the early development of FOIMS as well as annual FOIMS
System Plans. It appears that the concept for what eventually
became FOIMS originated in 1977. At that time, the FBI committed
itself to developing a system that would allow individual FBI
field offices to coordinate their many tasks. (Thus, the name:
Field Office Information Management System.) Coding on the
prototype program — which would be installed in the Richmond,
Virginia field office — began immediately in the COBOL computer •

arrangement sounded reasonable to him.

62

language. In 1979, the Richmond prototype was installed in the
New York City office to see how it would run in a large office.
Shortly thereafter, the FBI decided to change the hardware they
were using to run FOIMS from DEC minicomputers to IBM mainframes.

In 1983, FBI programmers began to rewrite the entire program
in the more powerful NATURAL language. The first NATURAL FOIMS
program was installed in 1985, and the NATURAL version slowly
replaced the COBOL version around the country. The COBOL version
of FOIMS was used in the Richmond and New York City offices until
the late 1980s.

All of the individuals we spoke with and documents we
reviewed are essentially consistent with the above summary. We
did not uncover any evidence inconsistent with the basic premise
that FOIMS was developed entirely in-house by the FBI.

The second track of our investigation focused, because of
the importance placed on a code comparison by INSLAW and the
House Judiciary Committee, on the retention of an expert to
compare the code of the FOIMS and PROMIS programs. We retained
Professor Randall Davis of the Massachusetts Institute of
Technology for that purpose. Professor Davis is a professor in
the Electrical Engineering and Computer Science Department at MIT
and is the Associate Director of the Artificial Intelligence
Laboratory. He is highly regarded in his field. In a letter
dated January 26, 1994, INSLAW's counsel concurred with this
assessment:

Your decision to engage the services of Dr. Randall
Davis of MIT as an expert witness to assist in this

63

comparison is appreciated. We are aware that Dr. Davis has
served as an expert witness in computer software
infringement cases in the federal courts, and we do not
question his technical qualifications.

We attempted to seek input from INSLAW and its counsel prior
to Professor Davis' code comparison in order to enhance the
possibility that INSLAW would find his conclusions acceptable.
Accordingly, we invited INSLAW's principals and INSLAW's counsel
to meet with Professor Davis several weeks before the scheduled
code comparison. It was hoped that Professor Davis would be able
to ask questions of those individuals about the structure of the
PROMIS code and the nature of INSLAW's claims as they relate to
the FOIMS system. We also invited INSLAW to have a
representative observe Professor Davis as he performed his code
comparison. INSLAW refused both invitations despite repeated
statements by INSLAW's principals and counsel that they wanted to
participate in that process. 1 ® Among the reasons INSLAW stated
for its refusal to participate in these efforts were our refusals
to comply with INSLAW's requests for detailed records regarding
the development and functionality of FOIMS and for direct access
to the FOIMS code. We were unable to comply with these requests
based on the FBI ' s determination that the release of such
information would compromise the system's security. We do not
think the FBI's position is unreasonable.

lg According to the special Counsel's report, Mr. Hamilton
also refused to participate in Professor Denning's comparison of
FOIMS and PROMIS. (Bua Report 144-145.)

64

INSLAW did, however, make some suggestions about what
versions of the FOIMS and PROMIS systems should be compared. In
a January 26, 1994 letter, INSLAW's counsel stated that it was
important that "the FOIMS system that is being compared is
written in the same COBOL programming language in which PROMIS is
written." In a letter dated January 13, 1994 and forwarded to us
along with the above-referenced correspondence, J.T. Westermeier,
an expert retained by INSLAW, wrote:

The comparison of the FOIMS and PROMIS software needs
to be conducted properly. The proposed software comparison
will be of very little probative value unless the comparison
is made on the basis of the 1983-1984 version of FOIMS and
PROMIS.

Professor Davis attempted to incorporate these suggestions
into his analysis. Accordingly, he compared the code from the
"Baltimore" version of PROMIS, 19 with a COBOL version of FOIMS.
According to Louise Goldsworthy of the FBI's Information
Resources Division, the COBOL FOIMS provided to Professor Davis
was last used in either 1984 or 1985. 20

After completing his comparison and analysis, Professor
Davis summarized his findings in a letter:

19 The actual software which was used for the comparison is
currently in use in the U.S. Attorney's Office in the Northern
District of Texas. It was installed there in 1985. However, it
is referred to as the "Baltimore" version as it is the same
software originally installed in the District of Maryland in
1984.

20 According to Ms. Goldsworthy, the FBI does not retain
archival copies of every version of FOIMS. Because the COBOL
version of the system was replaced by the NATURAL/ ADABASE version
during the 1980s, there are very few copies of the COBOL program
still in existence.

65

As we discussed in your office on April 6, 1994, I have
completed a thorough examination of the COBOL FOIMS code
recovered from backup tape by the FBI programmers, I have
compared it to the code for the " Baltimore” version of the
inslaw Promis system provided by the EOUSA, and I have
examined the code for the current (Adabase [NATURAL])
version of FOIMS. I have also had ample opportunity to run
both the Promis and the current FOIMS system in order to
understand their capabilities, and have examined manuals for
both systems.

I have reviewed a number of documents describing the
background and circumstances of the case, including: the

September 10, 1992, Investigative Report by the Judiciary
Committee on the Inslaw Affair, Inslaw's Analysis and
Rebuttal of the Bua Report, the 10 January 1993 letter and
report from Dr. Dorothy Denning describing her findings, a
current Promis manual, two Collections Procedure Manuals for
Promis dating from 1984 (one for Southern CA, the other for
Maryland), an article from Wired from 1993, a letter to you
from Elliot L. Richardson, Esq., dated 26 January 1994, and
the enclosure to that letter, a letter dated 13 January 1994
from J.T. Westermeier, Esq., to Mr. William Hamilton.

Based on all of this information, I am of the opinion
that there is no support of any form for the allegation that
either the COBOL FOIMS code or the Adabase FOIMS program
were copied from or to any significant degree modeled after
the Promis system. While there is some similarity in the
tasks undertaken by both programs, there are only very minor
functional similarities in the design of Promis and FOIMS,
and the implementations of those functional similarities are
entirely consistent with completely independent creation:
Even where similarity in high level function appears, the
actual code used to create the function in Promis and FOIMS
is quite different.

Based on our investigation and the investigations of the
House Judiciary Committee and the Special Counsel, we conclude
there is no evidence that PROMIS has ever been used by the FBI or
that FOIMS is or is based on PROMIS. 21

21 INSLAW also alleges that the Drug Enforcement Agency was
directed by the Attorney General in 1988 to install PROMIS. This
allegation is based on statements allegedly made by Carl Jackson,
a former DEA Deputy Assistant Administrator, that the Attorney
General issued "non~negotiable" orders to the FBI and DEA to
"chuck" their existing systems and replace them with PROMIS.

66

2. There Is No Credible Evidence that INSLAW's PROMIS Is
in Use or Has Been in Use in Any Agency of the U.S.
Government Other than the Department of Justice.

INSLAW also maintains that its PROMIS software has been used
or is currently in use in a variety of U.S. government agencies
outside the Department of Justice. Although the list of such
agencies is constantly evolving, INSLAW's claims focus primarily
on the Central Intelligence Agency, the National Security Agency
and the U.S. Navy. We have carefully reviewed these allegations,
interviewed individuals from each of these agencies and reviewed
certain documents provided by the CIA and the Navy. We are
unaware of any credible evidence that any of these organizations
ever used INSLAW's PROMIS software system.

As with most of INSLAW's assertions, these claims are based
almost completely on the alleged statements of anonymous sources
who have refused to cooperate with our review of the Special
Counsel's report. 22 However, each of these agencies has, in

Philip Cammera, a current DEA Deputy Assistant Administrator for
Information Systems, told the Special Counsel that the
allegations were false and that the DEA had never used PROMIS.

We attempted to interview Mr. Jackson who ultimately refused to
speak to us. However, House Judiciary Committee records
documenting their investigation indicate that House investigators
were unable to substantiate any of Mr. Jackson's allegations
through either minutes of the meetings in which the "non-
negotiable" orders were allegedly discussed or through interviews
with DEA computer technicians.

22 For example, the sources for the claim that INSLAW's
PROMIS is in use on U.S. nuclear submarines are "a trusted INSLAW
source with close ties to the CIA," "another individual with ties
to the CIA" and "a computer programmer on board a U.S. Navy
nuclear submarine." INSLAW refused to identify any of these
individuals. Unnamed sources also allegedly provided INSLAW with
information relating to the CIA and NSA.

67

fact, acknowledged that they either use software systems or
maintain databases that are identified by the "PROMIS" acronym.

At the request of either INSLAW, individuals related to INSLAW or
the House Judiciary Committee, each of these organizations has
undertaken internal investigations to determine whether the
"PROMIS” program or database in use within that organization is
in any way related to INSLAW's PROMIS software. Each has
determined that there is no connection.

The CIA uses a software system called Project Management
Integrated System developed by Strategic Software Planning
Corporation ("SSPC") of Cambridge, Massachusetts. 23 In response
to congressional inquiries, the CIA undertook an extensive search
to determine whether it had ever obtained INSLAW's PROMIS. As
discussed in detail in the report of the House Judiciary
Committee, it was subsequently determined that INSLAW's PROMIS
had never been obtained or used by the CIA. (House Report 57-59.)
We met with representatives of the CIA's General Counsel's Office
and Office of Legislative Affairs who were involved in
investigating the charges made by INSLAW. They detailed the
breadth of the investigation undertaken by the CIA and confirmed
the conclusion that INSLAW's PROMIS was never in use at the CIA.
They also stated that their investigation uncovered the fact that
SSPC ' s PROMIS system had been used at various times by two
sections within the CIA. They also made their investigative

23 SSPC ' s PROMIS is also used by certain Canadian government
agencies. For a more detailed discussion about SSPC and its
PROMIS software, see the discussion in the following section.

68

files available for our review. Those files were fully
consistent with the CIA's findings and indicated that an
extensive effort to search for the software had been
undertaken. 24

We also met with representatives of the National Security
Agency. The NSA maintains a database known as Product Management
Information Systems or "PROMIS" according to Carol Fay Boomer,
branch chief for the office which maintains the database, and
Nancy Starecky, who participated in the original development of
the database. "Product" is a term used within the NSA to refer
to intelligence reports. Accordingly, the NSA "PROMIS" database
contains abstracts of intelligence reports generated by various
parts of the NSA. Both Ms. Starecky and Ms. Boomer emphasized
that the NSA "PROMIS" is not a software program, but rather is an

24 In INSLAW's Addendum, INSLAW argues that the CIA has made
inconsistent and contradictory statements regarding the existence
of INSLAW's PROMIS software at the CIA. (INSLAW Addendum 7.) In
response to an inquiry from Chairman Brooks in late 1990, E.
Norbett Garrett, the CIA's Director of Congressional Affairs,
wrote:

We have checked with Agency components that track data
processing procurement or that would be likely users of
PROMIS, and we have been unable to find any indication that
the Agency ever obtained PROMIS software. If you have some
more specific information regarding this matter, we would
appreciate hearing from you.

Subsequently, the CIA conducted a more thorough search at
Chairman Brooks' request. That search was fully documented in
the materials provided to us by the CIA. In November 1991, CIA
Deputy Director Richard Kerr informed Chairman Brooks that the
more extensive search again revealed that INSLAW's PROMIS had
never been obtained by the CIA although the CIA had used "PROMIS"
software developed by Strategic Software Planning Corporation.

We disagree with INSLAW that these statements are inconsistent or
evidence of dissembling by the CIA.

69

application of the commercially available M204 database
management system. According to Ms. Starecky, M2 04 is one of the
earlier database systems. It basically allows the user to define
data fields and other information to be contained in individual
databases, such as the NS A PROMIS database. Ms. Starecky stated
that she was involved in the original development of the NSA
PROMIS database in the 1970s which was developed primarily to
allow the accumulation of management information regarding the
productivity of various NSA divisions.

Finally, the U.S. Navy has also acknowledged that it uses a
database with the "PROMIS" acronym. According to a letter signed
by the Navy's Inspector General, Vice Admiral D. M. Bennett, an
internal Navy investigation revealed that the Naval Undersea
Warfare Center Division had developed in-house a database
referred to as the Program Management Information System or
"PROMIS." The investigation also determined that the Navy did
not use INSLAW's PROMIS software and that the Navy "PROMIS"
database was in no way related to INSLAW's PROMIS. We reviewed
internal Navy documents regarding that investigation which were
all consistent with the findings stated by Vice Admiral Bennett.
In addition, we spoke with several individuals associated with
the Navy including a Supervisory Electronics Engineer employed in
the Logistics Support Branch at the Naval Undersea Warfare
Center, Newport Division. The Supervisory Electronics Engineer
told us that he has been involved with the Navy's "PROMIS"
database since it was developed in the early 1980s. He stated

70

that the database was designed and developed in-house under his
direction. The word "program" in the database’s name refers to
the Fleet Modernization Program. The database is used to
maintain an inventory of combat systems and other equipment
aboard Navy submarines and, thus, to help plan for future changes
in fleet configurations. According to the Supervisory
Electronics Engineer, the database is not accessible from the
submarines but only from certain land bases. 25

It should be noted that we were concerned when we learned
that all three of these agencies were using databases or software
programs with the same "PROMIS” acronym. However, our
investigation has failed to uncover any evidence that these
programs were based on or in any other way derived from INSLAW’s
software. When one considers the frequency with which ’’MIS" —
"Management Information Systems" — is used within the computer
field, the fact the databases share the "PROMIS" acronym is less
remarkable than it initially appears. In light of our findings
and the lack of any support for INSLAW's allegations other than
the shared acronym and the alleged statements of unknown sources,

25 INSLAW asserts that the database is maintained on U.S. as
well as British submarines and not solely on land bases. These
assertions are based on unnamed sources and a 1987 contract
solicitation published in the Commerce Business Daily seeking
technical and engineering services for, among many other things,
the Navy’s "PROMIS" database. Though the synopsis of the
statement of work contained in the announcement does appear to be
somewhat ambiguous, INSLAW has grossly mischaracterized the
announcement in its Addendum. (INSLAW Addendum 6.) Furthermore,
in light of the fact the announcement states that it is seeking
services to support a "land based test facility," we do not think
INSLAW’s charge that the Navy has made contradictory statements
with regard to this database withstands any scrutiny.

71

we conclude that there is no credible evidence that INSLAW's
PROMIS software has been obtained by the CIA, the NSA or the U.S.
Navy.

E. There Is No Credible Evidence that the Department of Justice
or Individuals Involved with the Department of Justice
Improperly Distributed PROMIS Software to Foreign
Governments or Entities.

INSLAW alleges that Department of Justice officials, working

with Dr. Brian and Robert Maxwell, were involved in the

international distribution of Enhanced PROMIS. According to

INSLAW:

The accounts are generally consistent about the motivations
for the sales: (1) the personal financial gain of Earl Brian
and colleagues; (2) the generation of extra funds for
financing U.s. covert intelligence operations that the U.S.
Congress has declined to finance, such as the mid-1980's
covert assistance to the Contras in Nicaragua; and (3) an
initiative to penetrate the secret files of foreign
intelligence and law enforcement agencies by inducing them
to acquire and implement the PROMIS database management
software and the necessary computer hardware, after the
software and hardware have been secretly modified to permit
electronic eavesdropping by the U.S. National Security
Agency .

(INSLAW Rebuttal 36.) INSLAW maintains the software was sold to
government agencies in Israel, Canada, Jordan, Egypt, Singapore,
South Africa, eastern European countries, Central American
countries and elsewhere. 26

26 We determined that it was unnecessary to investigate most
of these allegations as they are based primarily on
uncorroborated statements usually attributed to unnamed sources.
In addition to foreign governments, INSLAW also asserts that
PROMIS was distributed to certain international organizations,
including the World Bank and the International Monetary Fund.
(INSLAW Addendum 17-18.) The basis for these claims are also the
alleged statements of unnamed government officials. (Reporter

72

The Special Counsel concluded after a preliminary
investigation that additional investigation of these claims was
not warranted and that it ’'would be an irresponsible use of the
taxpayers' money to initiate this type of international fishing
expedition where there is so little reason to believe that we
would find evidence of a crime or other wrongdoing by the
government." (Bua Report 152.) However, although it failed to
uncover any direct evidence of the international distribution of
PROMIS other than the testimony of Mr. Ben-Menashe and others
discussed above, the House Judiciary Committee concluded that
"questions remain" as to Whether such distributions took place.
(House Report 111.)

We have carefully reviewed INSLAW's allegations and the
evidence which INSLAW claims supports them, the files of the
House investigation and all other available documentation. Based
on that review, we find absolutely no credible evidence that
Enhanced PROMIS was distributed internationally by the Department
of Justice or others associated with the Department. INSLAW's
allegations are based on two basic sources: (1) the testimony of
Mr. Ben-Menashe, Mr. Riconosciuto and others who, as discussed in

Anthony Kimery also claims to have anonymous sources that confirm
the World Bank uses PROMIS.) Mr. Ibrahim Shihata, Vice President
and General Counsel of the World Bank) informed us that he
conducted two investigations at the Bank after being informed by
INSLAW's counsel of INSLAW's allegations. Both Mr. Shihata and
Mr. Everardo Wessel of the Bank's Information Center informed us
that they found no evidence that the Bank was using or had ever
used any version of the PROMIS program.

73

detail above, are totally lacking in credibility, 27 and (2) the
unsubstantiated conjectures and musings of INSLAW and its
principals. As a result, we do not intend to recount all of the
various charges made by INSLAW in this report.

However, there are three areas upon which INSLAW has focused
its attention that we will address: (1) the alleged distribution
of Enhanced PROMIS to Israel; (2) the alleged distribution of
Enhanced PROMIS to Canada; and (3) the alleged role of the late
Robert Maxwell in those efforts. Our review of those allegations
leads us to conclude that there is no credible evidence
supporting those claims.

1 . The Alleged Distribution of Enhanced PROMIS to Israel.

INSLAW maintains that Enhanced PROMIS was provided to Israel
in 1983 and that Israel later became heavily involved with U.S.
intelligence agencies in the further international distribution
of the software. The root of this allegation lies in the
undisputed fact that the Department of Justice did, in fact,
provide some version of the software to an Israeli government
representative in May 1983. Justice Department officials have
steadfastly maintained that the software provided to Israel was
the public domain version of PROMIS (thus making it perfectly

27 Mr. Ben-Menashe is, according to INSLAW, the primary
source for these allegations.

Material Omitted Pursuant to
Rule 6(e) of Fed. R- Crim. Proc.

74

proper for the U.S. government to provide such software), and
documents prepared contemporaneously with the transfer to Israel
reflect that fact. Nevertheless, the House Report suggests that
this transfer was a cause of concern for the Committee:

Department of Justice documents show that a "public
domain" version of the PROMIS software was sent to domestic
and international entities including Israel. Given the
Department's position regarding its ownership of all
versions of PROMIS, questions remain whether iNSLAW's
Enhanced PROMIS was distributed by Department officials to
numerous sources outside the Department, including foreign
governments .

(House Report 111.)

Our review of the prior investigations and the results of
our own investigation revealed no credible evidence that the
software provided to Israel in 1983 was Enhanced PROMIS and, in
fact, verified that it was the public domain version of the
software that was transferred. Furthermore, there is no other
credible evidence of which we are aware that indicates that
Enhanced PROMIS was ever provided to Israel.

There is no question that some version of PROMIS was
provided to an Israeli representative in May 1983. On May 12,
1983, Jack Rugh, a Department of Justice employee involved in the
administration of the PROMIS contract, forwarded a magnetic tape
and supporting documentation to Madison Brewer for transmittal to
Dr. Joseph Ben Orr of Israel with a memorandum providing the
following:

Enclosed are the PROMIS materials that you asked me to
produce for Dr. Ben Orr of the Government of Israel. These
materials consist of the LEAA DEC PDP 11/70 [public domain]
version of PROMIS on magnetic tape along with the printed
specifications of that tape, as well as two printed volumes

75

of PROMIS documentation for the LEAA version of the system.

We spoke with Dr. Ben Orr, who lives in Israel, several
times by telephone. In 1983, Dr. Ben Orr was the Senior
Assistant State Attorney for the Israeli Justice Ministry. He
spent part of 1982 and 1983 working in the Justice Department's
Office of Legal Policy as part of a new and short-lived exchange
program between the U.S. Justice Department and the Israeli
Justice Ministry. 2 ® He told us that he essentially acted as a
consultant to the Department on several issues. He retired in
1989 as District Attorney for the city of Jerusalem.

Dr. Ben Orr stated that while he was at the Department of
Justice he learned that the Department had decided to computerize
the U.S. Attorneys* Offices. He asked to be allowed to watch the
process of automating those offices as he knew that Israel was
considering automating certain functions in its prosecutors'
offices. As part of that effort, he travelled to several
locations around the country to observe both the installation and
utilization of PROMIS.

Dr. Ben Orr also stated that he set up a meeting with Mr.
Hamilton at INSLAW's offices. During that meeting, Mr. Hamilton
provided Dr. Ben Orr with some papers that illustrated the data

28 INSLAW made a Freedom of Information Act request in March
1993 for Justice Department documents relating to Dr. Ben Orr and
another Israeli participant in the exchange program. The search
uncovered no responsive files. We asked the Office of
Information and Privacy to expand their search beyond that
statutorily required in order to determine for certain whether
any responsive documents existed. They still were unable to
locate any documents.

76

compiling potential of the PROMIS software. Dr. Ben Orr said he
forwarded those papers to the Israeli Justice Ministry for their
review. Dr. Ben Orr said that this was the only meeting that he
ever had with Mr. Hamilton and that he was the only
representative from the Department of Justice or the Israeli
government at the meeting. He noted that Mr. Hamilton did not
demonstrate the software during the meeting. 29

Dr. Ben Orr subsequently inquired of the Department’s
’’computer people" whether there was any way he could get a copy
of the PROMIS software for possible use in Israel. After some
negotiation, the Department gave him a reel of tape with the
software on it and two large files of reading material. Dr. Ben
Orr said that he was assured by Department personnel that the
Department owned the software that was being provided to him. He
could not remember the names of the "computer people" with whom
he dealt.

Dr. Ben Orr stated that when he returned to Israel he
brought the software to the Justice Ministry. He said that the
Ministry decided not to use the PROMIS software for two reasons:
(1) the computer then in place at the Ministry was too small to
use the software; and (2) the Israeli government decided that

29 INSLAW maintains that Rafi Eitan, an Israeli intelligence
officer, actually attended the meeting with Mr. Hamilton using
"Dr. Ben Orr" as an alias. Dr. Ben Orr denied this was true. He
stated that he attended the meeting with Mr. Hamilton.
Furthermore, he stated that he knew of Mr. Eitan through the
media but had never met him personally. Finally, Dr. Ben Orr
described this and other allegations made by Mr. Hamilton as
"sheer lies and imagination."

77

they wanted to install a program developed by an Israeli company
rather than a foreign firm and one that was tailored specifically
to the needs of the Ministry. The entire project was put out to
bid. Dr. Ben Orr stated that the Israeli government never did
and does not now use any version of PROMIS.

During our interview, Dr. Ben orr stated that he still had
the magnetic tape that was provided to him by the Department of
Justice in 1983. After extensive negotiations. Dr. Ben Orr
agreed to deliver the tape to the security officer at the
American Consulate in Jerusalem. The tape was subsequently
delivered to our offices.

With the aid of Dr. Randall Davis, we reviewed the contents
of the tape in order to determine whether the tape contained the
public domain version of PROMIS or Enhanced Promis. In
particular, we looked for evidence that the software on the tape
included the three major enhancements identified by INSLAW as the
constituting the difference between public domain PROMIS and
Enhanced PROMIS: the Data Base Adjustment subsystem, the Batch
Update subsystem and the 32-bit Architecture VAX version of
PROMIS. (See In re Inslaw . 83 B.R. at 98-100, for a detailed
description of the functions of these enhancements.) We also
reviewed the code contained on the tape to determine the dates
the various programs were developed.

Based on that review, there was no indication that the
software on the tape provided by Dr. Ben Orr included any of the
primary enhancements that INSLAW maintains creates Enhanced

78

PROMIS. Perhaps roost telling, the indicated source computer and
object computer for each program on the tape was the "PDP 11"
computer. This is consistent with the software being the public
domain version. According to INSLAW, one of the major
improvements in Enhanced PROMIS was the redesign of the software
to be used on 32-bit architecture VAX minicomputers. None of the
code on the tape in question indicated that it was for a VAX
computer. Based upon the analysis of the code, Dr. Davis
concluded that the tape almost certainly contained the , public
domain version of the software. 30

Nevertheless, INSLAW maintains that the software delivered
to Israel in 1983 was Enhanced PROMIS and that Israeli
intelligence officer Rafi Eitan, using the alias of Dr. Joseph
Ben Orr, was the individual who met with Mr. Hamilton. INSLAW
bases these claims on the following: the testimony of Ari Ben-
Menashe, the fact that the tape was delivered in May 1983 shortly
after Modification 12 was ratified, and the fact that the
description provided to Mr. Hamilton by an Israeli reporter of
Dr. Ben Orr does not, according to Mr. Hamilton, match the
description of the individual he met with in 1983. ( See INSLAW
Rebuttal 38-43; INSLAW Addendum 9-12.) As discussed above, we
have already concluded that the testimony of Mr. Ben-Menashe

30 Based on the Bankruptcy Court's opinion, it is a little
difficult to understand how any program delivered to Israel in
May 1983 could include the three primary enhancements which
INSLAW claims are proprietary to INSLAW. According to Finding of
Fact 28, the Data Base Adjustment enhancements were not even
delivered to the Department of Justice until 1985. In re Inslaw .
83 B.R. at 98.

79

lacks credibility. Second, we do not think the fact that the
software was delivered after the implementation of Modification
12 necessarily leads to the conclusion that it was Enhanced
PROMIS rather than public domain PROMIS. In fact, our review of
the code on the tape indicates that the tape contains only the
public domain version of the software. Finally, we question the
credibility of the identification by Mr. Hamilton and other
INSLAW employees from "a police-style photographic lineup*' of Mr.

Eitan as the individual with whom he met in 1983. (INSLAW
Rebuttal 40-41, INSLAW Addendum 10-11.) In light of the fact
that all the other evidence indicates that Enhanced PROMIS was
not delivered to Israel, the alleged identification by Mr.

Hamilton of Mr. Eitan does not, in our opinion, constitute
significant credible evidence that either Mr. Eitan attended the )

1983 meeting as "Dr. Ben Orr" or that the Department of Justice
distributed Enhanced PROMIS to Israel. 31

31 As further evidence of Israel's alleged involvement in the
distribution of PROMIS, INSLAW points to a passage in Mr. Ben-
Menashe's book in which he claims to have seen a cable directing
that $600,000 from a CIA-Israeli slush fund be transferred to
Earl Brian and then to the Washington, D.C. law firm of
Dickstein, Shapiro & Morin ("DSM") . ( Profits of War 141.) The
money was allegedly used to fund the severance package of
INSLAW's counsel, Leigh Ratiner, from the firm. Mr. Ratiner
allegedly had been too aggressive in challenging the Department
of Justice. According to INSLAW, "In a meeting at the Justice
Department on December 16, 1993, INSLAW presented a sensitive
document, authored by a self-evidently credible person, offering,
under appropriate circumstances, to make available evidence
corroborative of significant elements of Ben-Menashe * s published
claims." (INSLAW Addendum 4.) The source of this corroborative
evidence was Reynaldo Liboro, the former office manager at DSM.
Mr. Liboro is currently serving a five-year federal prison
sentence at the Federal Correctional Institution in Butner, North
Carolina for bank fraud and theft. Mr. Liboro pleaded guilty in

80

2 .

The Alleged Distribution of Enhanced PROMIS to Canada.

INSLAW is critical of the Special Counsel's Report due to
the Special Counsel's alleged failure to adequately investigate
allegations that INSLAW 's PROMIS is in use in several agencies of
the Canadian government. INSLAW is particularly critical of the
Special counsel's decision not to interview former Canadian
stockbroker John Belton. As discussed in Section IV(C) above, we
interviewed Mr. Belton and found his information was almost
completely based on statements by sources who he insisted on
keeping anonymous.

Nevertheless, the decision by the House Judiciary Committee
granting us access to the records of its investigation allowed us
to carefully review the statements of those individuals
interviewed by Committee investigators about the alleged Canadian
connection. Although the House Judiciary Committee concluded
that it had ''been effectively thwarted in its attempts to support
or reject the contention that INSLAW software was transferred to
the Canadian Government" (House Report 57) , we found the
transcripts of the relevant interviews to be most informative.

1990 to defrauding DSM of approximately $1.3 million in a
checking scam. According to the AUSA who handled the case,
attorneys at DSM were aggressive in pursuing Mr. Liboro after the
fraud was uncovered and Mr. Liboro had fled to the Philippines.
During an interview with us, Mr. Liboro claimed to have first-
hand knowledge of certain events consistent with the account
provided by Mr. Ben-Menashe in his book. He also informed us
that his former assistant at DSM might be able to confirm his
story. We interviewed his former assistant who was unable to
confirm any significant aspect of his story.

81

House investigators took statements from at least six
current or former employees of the Canadian government, all but
two of which were given under oath. All those statements were
consistent. 32 In essence, these officials described the process
by which two Canadian agencies, Public Works Canada and the
Canadian International Development Agency, analyzed and purchased
a project management software package from Strategic Software
Planning Corporation, a Massachusetts based company, in the mid-
1980s. The program was called Project Management Integrated
System or "PROMIS". There is no evidence linking this software
to INSLAW's PROMIS other than the shared acronym.

In 1991, the Canadian Workplace Automation Research Centre
conducted a study to determine the then-current inventories of
software packages, system development activities and hardware
within the Canadian government. During that study, an error was
made by a college student working on the inventory when he
identified the vendor of the "PROMIS" software in use at the
Canadian agencies as INSLAW rather than Strategic Software
Planning Corporation. The student had been told that the
software was called "PROMIS" and was tasked the responsibility of
determining the vendor. He mistakenly concluded the vendor was
INSLAW after a brief search of public records. A subsequent
telephone call to INSLAW by that student seeking additional

32 The witnesses included two employees of the Canadian
International Development Agency; one employee of Public Works
Canada; a former contractor of the Canadian Workplace Automation
Research centre; and one current employee and one former intern
of the Canadian Workplace Automation Research Centre.

82

information about PROMIS as part of the study led to the
allegations that INSLAW's PROMIS had been distributed to Canada.
However, there is nothing in the testimony of any of these
witnesses which supports such an hypothesis.

Furthermore, Committee investigators also took a sworn
statement from Massimo Grimaldi, president of Strategic Software
Planning Corporation. As reflected in the House Judiciary
Committee report, Mr. Grimaldi confirmed in that statement that
his company had sold copies of its "PROMIS” software to Public
Works Canada and CIDA. According to Mr. Grimaldi, the software
was originally designed to perform scheduling, resource
management and cost control functions on construction projects
although its applications have become more generalized over the
years . 33

In conclusion, all of the available evidence indicates that
the "PROMIS" program in use by certain Canadian agencies is not a
version of INSLAW's PROMIS but rather a totally different program
developed by a different company.

33 Two other aspects of Mr. Grimaldi's statement are
noteworthy. First, Mr. Grimaldi stated that his company tried to
file for a Canadian trademark for "PROMIS" but discovered that
there was another company (not INSLAW) that was already marketing
a manufacturing system called "PROMIS." Accordingly, his company
marketed its product as "SSP's PROMIS" or "PROMIS by Strategic
Software planning Corporation" in Canada. Second, the transcript
reflects that Mr. Grimaldi provided a copy of SSPC's PROMIS to
House Committee investigators during the interview. During our
review of Committee files, we were unable to locate the copy of
the software or any documents describing any analysis of that
software.

83

3 .

The Alleged Involvement of Robert Maxwell in the
International Distribution of PROMTS.

In the Addendum submitted to the Attorney General by INSLAW
in February 1994, INSLAW maintains that the late British
publisher Robert Maxwell played a critical role in the alleged
international distribution of PROMIS by Israel and the United
States. (INSLAW Addendum 12-14.) According to INSLAW, Robert
Maxwell was used as a "cutout” by Israeli intelligence, f id. 4.)
Furthermore, INSLAW maintains that "Maxwell's role as a cutout
for a foreign nation's sale of computer software has been
implicitly acknowledged by the actions of the FBI." f Id . ) There
is simply no evidence — again, other than the statements by Mr.
Ben-Menashe — of any involvement of Mr. Maxwell in the sale or
distribution of PROMIS.

The reference in INSLAW's Addendum to the implicit
acknowledgement by the FBI of Mr. Maxwell's role in the
dissemination of PROMIS and as a "cutout" for Israeli
intelligence agencies apparently relates to the production of
documents by the FBI pursuant to a FOIA request made by INSLAW in
1993. On January 10, 1994, the FBI produced 20 pages of FBI
documents in response to INSLAW's request for all documents
relating to the "involvement of the late Robert Maxwell in the
dissemination, marketing or sale of computer software systems,
including but not limited to the PROMIS computer software
product . between 1983 and 1992." (Emphasis added.) The FBI
redacted portions of those documents prior to their distribution
to INSLAW. Based on INSLAW's analysis of certain unredacted

84

codes on those documents, INSLAW concluded that the Albuquerque,
New Mexico office of the FBI conducted a "foreign
counterintelligence investigation" of Mr. Maxwell and one of his
corporations, f id. 13.)

From this conclusion, INSLAW made a remarkable leap upon
which it has based its Maxwell-related allegations:

Why would the FBI conduct a foreign counterintelligence
investigation of Robert Maxwell for selling computer
software in New Mexico in 1984? It is reasonable to infer
that the FBI office in Albuquerque opened a foreign
counterintelligence investigation of Maxwell and Pergamon
International because Maxwell sold PROMIS to one or more
U.S. defense installations in New Mexico and because the FBI
may have been concerned that a foreign nation [i.e. Israel]
intended to use the PROMIS software as an electronic Trojan
horse for penetrating the computerized database (s) of the
targeted defense installation (s) .

Id.

We disagree that such an inference is reasonable. There is
no evidence supporting this flight of fancy by INSLAW. While we
do not intend to comment on the accuracy of INSLAW’s analysis of
certain codes on the documents provided to INSLAW, we do note
that none of the documents in question even mentioned INSLAW or
PROMIS. The FBI made unredacted versions of the documents
available to us for our review. None of the documents referred
to INSLAW or PROMIS or to any other subject even remotely related
to INSLAW's allegations. In short, there is nothing of which we
are aware that links Mr. Maxwell to PROMIS.

85

F. There Is No Evidence that the Department of Justice's Office
of Special Investigations Is a "Front" for the Department's
Own Covert Intelligence Agency.

In the Addendum to iNSLAW's Rebuttal submitted by INSLAW on

February 14, 1994, INSLAW for the first time alleged that the

Department's Office of Special Investigations ("OSI") was at the

center of the various conspiracies which INSLAW claims exist.

These remarkable — and wholly unsubstantiated — charges are

summarized in the introduction to the Addendum:

One of the organizational units that reports to Mark
Richard is the Office of Special Investigations (OSI) .

OSI's publicly-declared mission is to locate and deport Nazi
war criminals. The Nazi war criminal program is, however, a
front for the Justice Department's own covert intelligence
service, according to disclosures recently made to INSLAW by
several senior Justice Department career officials.

One undeclared mission of this covert intelligence
service has been the illegal dissemination of the
proprietary version of PROMIS, according to information from
reliable sources with ties to the U.S. intelligence
community. INSLAW has, moreover, obtained a copy of a 27-
page Justice Department computer printout, labelled
"Criminal Division Vendor List." That list is actually a
list of the commercial organizations and individuals who
serve as "cutouts" for this secret justice Department
intelligence agency, according to intelligence community
informants and a preliminary analysis of the computerized
list. . .

According to written statements of which INSLAW has
obtained copies, another undeclared mission of the Justice
Department's covert agents was to insure that investigative
journalist Danny Casolaro remained silent about the role of
the Justice Department in the INSLAW scandal by murdering
him in West Virginia in August 1991.

(INSLAW Addendum 6.) These allegations were repeated in an

INSLAW press release of approximately the same date.

These charges are fantasy. There is no corroborative

evidence that is even marginally credible. Rather, INSLAW finds

86

it sufficient simply to rely on unnamed "reliable sources" and
anonymous "senior Justice Department career officials." Not
surprisingly, none of those individuals has come forward to be
interviewed. Considering the outrageous nature of these charges
and the absolute lack of evidence to support them, it is
difficult not to question the motivations of INSLAW in asserting
them.

Nevertheless, we attempted to investigate these claims.
Accordingly, we interviewed Deputy Assistant Attorney General
Mark Richard, the individual INSLAW suggests oversees the covert
operations of OSI. Mr. Richard stated that INSLAW's charges are
ridiculous. He said that OSI is only involved in its stated
mission of locating and deporting Nazi war criminals and in
related projects such as the analysis of Kurt Waldheim's role
during World War II. He did, however, note that OSI does work
with various intelligence agencies in fulfilling its mandate of
locating war criminals. He categorically denied any involvement
by OSI in covert operations, the dissemination of PROMIS or the
death of Mr. Casolaro. He said that he considers these and other
allegations made by INSLAW to be slanderous.

We should also note that during our tenure at the Department
we have not become aware of OSI engaging in any of the types of
activities alleged by INSLAW.

With regard to the vendor list that INSLAW alleges lists
those companies that serve as "cutouts" for the Department's
covert intelligence activities, INSLAW relies for this assertion

87

on two "usually reliable informants." (INSLAW Addendum 23.) We
showed the list to Robert Bratt, Executive officer for the
Justice Department's Criminal Division. Mr. Bratt said the list
is exactly what it purports to be: a list of vendors used by the
Criminal Division. According to Mr. Bratt, the Criminal Division
has been using an automated system called PROCURE for requesting
goods and services from the Justice Department's administrative
offices since the beginning of the 1993 fiscal year. The main
suppliers to the Division are maintained on a master list and
given codes so that orders may be placed more quickly simply by
inputting the vendor code. When the code is entered, the PROCURE
system automatically pulls up the address, telephone number,
contact person and other relevant data. Mr. Bratt stated that
the list provided to us by INSLAW was simply a copy of the master
list of Criminal Division vendors.

We asked Mr. Bratt to print a current version of the vendor
list. He did so, and it was in the same format as the list
provided to us by INSLAW. Furthermore, it appears that, although
the list generated by Mr. Bratt was longer, all the vendors
included in the list provided to us by INSLAW were also on Mr.
Bratt 's list.

We have no reason to believe that the vendor list is
anything other than what it purports to be and what Mr. Bratt
identified it as. Conversely, according to INSLAW's theory, many
of the largest companies in the world (including AT&T, Canon, IBM
and Xerox) are fronts for OSI's covert operations. There is

88

nothing to suggest this is true.

The ’'support" for INSLAW's allegation that OSI was involved
in the death of Mr. Casolaro is equally absurd. INSLAW relies on
a series of typed questions and answers that were allegedly
prepared by an unnamed senior CIA official and faxed to "an
individual who has stated under oath that he has served as an
operative on national security issues for various agencies of the
U.S. Government" who transmitted the questions and answers to a
San Francisco journalist. (INSLAW Addendum 24-25.) Those
questions and answers attribute to the unnamed CIA source the
assertion that Mr. Casolaro was "murdered by agents of the
Justice Department." f id, at 25.) No matter how these charges
may be presented, they are in essence allegations of an unnamed
source without any corroborating evidence. As discussed in
Section V below, we found no credible evidence that Mr.

Casolaro' s death was anything other than a suicide.

In conclusion, these newly articulated charges are totally
devoid of substantiation and appear to have been either recently
created by INSLAW or repeated by INSLAW without any regard to the
truth .

G. There Is No Credible Evidence that INSLAW-Related Documents
Were Improperly Destroyed by the Justice Department Command
Center .

INSLAW alleges that Garnett Taylor, a former Department of

Justice employee, and others associated with the Department of

Justice Command Center destroyed "classified national

89

security/ intelligence documents" related to INSLAW. INSLAW
insinuates that the alleged destruction took place in order to
keep embarrassing documents from being revealed. The Special
Counsel was unable to uncover any evidence that any such
destruction took place. (Bua Report 109-113.) We too were unable
to find any evidence that any documents relating to INSLAW were
destroyed by Mr. Taylor or other Command Center personnel.

In its various papers, INSLAW has identified several sources
as allegedly providing INSLAW with information linking Mr. Taylor
to the destruction of INSLAW documents. In Exhibit B to the
INSLAW Rebuttal, INSLAW asserts that two career DOJ employees —
who insist on anonymity -- have confided to INSLAW information
related to the improper destruction of documents. The first,
"Witness #7," allegedly claims to have witnessed admissions about
the destruction of documents by Mr. Taylor. "Witness #11"
allegedly saw Mr. Taylor and his supervisor, James Walker, remove
classified documents from the Civil Division for destruction. In
addition, Mr. Hamilton claimed in his 1989 affidavit that Ronald
LeGrand's confidential source "believes that documents relating
to Project Eagle were shredded inside DOJ."

None of these allegations have been corroborated.

Material Omitted Pursuant to
Rule 6(e) of Fed. R. Crim. Proc.

Mr. Walker

informed the Special Counsel that there were no INSLAW or PROMIS
documents maintained in the DOJ Security Department and that to

90

his knowledge there were never any INSLAW documents in any of the
safes he controlled or knew about.

Material Omitted Pursuant to
Rule 6(e) of Fed. R. Crim. Proc.

In. its Rebuttal, INSLAW argues that the testimonies of
Messrs. Taylor and Walker are inconsistent and faults the Special
Counsel for accepting the unsworn statement of Mr. Walker over
the grand jury testimony of Mr. Taylor. This position is based
on INSLAW's assumption (pursuant to FRCP 6(e), INSLAW was not
provided access to grand jury testimony) that Mr. Taylor
testified to the grand jury that “Walker had instructed Taylor to
receive classified intelligence/national security documents
relating to the INSLAW case from the files of a Civil Division
attorney who had left DOJ, and then to destroy those documents."
(INSLAW Rebuttal 46.)

Material Omitted Pursuant to
Rule 6(e) of Fed. R. Crim. Proc.

In a November 19, 1993 letter, INSLAW's counsel stated the
following:

In this connection, you should be made aware of claims made
directly to Mr. and Mrs. Hamilton by Mr. Garnett Taylor

91

based on first-hand knowledge Mr. Taylor acquired while
employed in one of the Department’s sensitive compartmented
information Facilities (SClFs) . Subsequent to his
appearance before Judge Bua ' s federal grand jury in Chicago,
Mr. Taylor told the Hamiltons that the one provable felony
committed in the INSLAW affair is the destruction of
documentary evidence by the Department regarding INSLAW and
PROMIS. Mr. Taylor further told the Hamiltons that the
lawyer who represented Mr. Taylor in the Bua investigation
told Mr. Taylor that the Bua investigation was proceeding in
such a way as to deliberately avoid the discovery of the
truth .

We, of course, have no direct knowledge as to what Mr.

Taylor told the Hamiltons

Material Omitted Pursuant to
Rule 6(e) of Fed. R. Crim. Proc.

Furthermore, we interviewed Mr. Taylor about these
alleged comments. Mr. Taylor admitted to speaking with the
Hamiltons on several occasions

Rule 6<e) of Fed. R. Cnm. Pro,

but stated that he never told the Hamiltons that the “one
provable felony committed in the INSLAW affair" involved the
destruction of documents. Rather, he told us that he informed
Mr. Hamilton in one of those conversations that there was nothing
provable regarding the destruction of documents.

Mr. Taylor did, however, state that he told the Hamiltons
that he believes there may have been a felony committed relating
to the destruction of INSLAW documents. He said his belief is
based on media reports and on his understanding of the
conclusions reached by the House judiciary committee. Mr. Taylor
stated that he has no first-hand knowledge that any INSLAW-
related documents were destroyed by the Department's security
staff or others. He also stated that he has no reason to believe

92

that Mr- Walker ever destroyed any documents related to INSLAW or
to PROMIS.

Mr. Taylor also told us that his attorney, Susan Bogart,
never said that the Special Counsel's investigation was
proceeding in such a way as to deliberately avoid the discovery
of the truth or anything to that effect. Mr. Taylor denied
telling either of the Hamiltons that Ms. Bogart had made any such
statements. However, he did tell the Hamiltons that he felt the
Special Counsel's investigation was taking a long time and that
he did not feel investigators asked him very penetrating
questions.*

Further, Ronald LeGrand's confidential source also failed to
support INSLAW's allegations. As set forth in more detail in
Section IV(B) above, we interviewed LeGrand's Source in some
detail. During that interview, LeGrand's Source stated that he
had no information regarding the destruction of any documents and
that he never indicated otherwise to Mr. LeGrand.

And finally, the anonymous sources that INSLAW and its
principals claim have critical information concerning the
destruction of documents never came forward to cooperate with our
efforts. As discussed in Section IV (A) above, we attempted to

M Material Omitted Pursuant to

Rule 6(e) of Fed. R. Crim. Proc.

Ini addition, Mr. Taylor acknowledged to
us tnat he is suing the Department of Justice through the Merit
System Protection Board seeking reinstatement of his job. Mr.
Taylor maintains that he was dismissed in retaliation for his
decision to volunteer for service in the Desert Storm military
operation.

93

provide adequate assurances to these individuals through INSLAW
and its counsel. Nevertheless, neither these nor any of INSLAW's
other anonymous sources agreed to be interviewed by us.

H. There Is Insufficient Evidence To Support INSLAW's

Allegation that Department of Justice Employees

Conspired to Improperly Convert INSLAW's Bankruptcy Case.

Of all the allegations made by INSLAW, the allegations that
Department of Justice employees improperly attempted to convert
INSLAW's Chapter 11 reorganization proceeding to a Chapter 7
liquidation and that those employees subsequently committed
perjury in order to cover-up their misdeeds are the most
troubling. Unlike virtually all of INSLAW's other allegations,
these allegations find some credible support in the testimony of
some witnesses and in some, albeit ambiguous, contemporaneous
notes. After exhaustively identifying and analyzing all of the
relevant evidence (Bua Report 190-231) , the Special Counsel
concluded, "Although the matter is not free from doubt, we
conclude that there is insufficient evidence to support a finding
that DOJ planned or attempted to convert INSLAW's bankruptcy case
or engaged in any cover-up to conceal the conduct alleged." (Id.
190.)

Based on our review of the Special Counsel's Report,

INSLAW's Rebuttal and other analyses of these allegations, we
concur with the Special Counsel. Although we are troubled by the
recantation of testimony by two key witnesses, we believe that
the weight of the evidence supports the conclusion that there was

- 94 -

no effort improperly to convert INSLAW's bankruptcy proceedings.
Furthermore, we see no reason to overturn the decisions of the
Office of Professional Responsibility and the Public Integrity
Section on this matter.

The facts surrounding these allegations are cumbersome and,
at times, confusing. The Special Counsel used 41 pages to
address and analyze those facts and to describe the various
investigations that have been undertaken as a result of these
allegations. We do not intend to restate that which is already
succinctly set forth in the Special Counsel's report, especially
in light of the fact that the basic facts have not changed since
1987. We do note, however, that we believe the Special Counsel's
analysis is well reasoned and is fully consistent with the
underlying facts.

Furthermore, we wish to identify two factors that, in
addition to the analysis set forth in the Special Counsel's
report, were important to our conclusion.

(1) There is absolutely no evidence that any Justice
Department official ever actually attempted to convert INSLAW's
bankruptcy to a Chapter 7 liquidation during the time frame
alleged by INSLAW. 35 It is important to note that the United
States Trustee does not have the authority to convert a

35 A motion to convert INSLAW's bankruptcy proceeding to a
Chapter 7 proceeding was filed on September 9, 1987, pursuant to
a routine Internal Revenue Service request based on INSLAW's
failure to pay federal taxes. See 11 U.S.C. § 1112. This was
well after the alleged effort in 1985 to convert the proceeding
which is the focus of INSLAW's allegations and after those
allegations were litigated before the Bankruptcy Court.

95

bankruptcy proceeding; rather, he or she merely has the authority
to petition the Bankruptcy Court to do so. However, it is
undisputed that no such petition was ever made prior to 1987.
Thus, if any effort to improperly convert INSLAW's bankruptcy was
made, it proceeded only to the point that pressure to do so was
brought to bear and fizzled before any step actually intended to
effectuate that plan was taken.

This point is important for several reasons. First, even if
the weight of the evidence supported INSLAW's allegation that
Justice Department officials attempted to convert the bankruptcy
proceeding (which it does not) , it is clear that INSLAW was not
in any way harmed by that effort. INSLAW did not even begin to
allege that such an effort took place until after the Hamiltons
had breakfast with Anthony Pasciuto in 1987 , two years after the
alleged conduct took place. There is no evidence, and none is
alleged to exist by INSLAW, that INSLAW was hindered by these
alleged efforts or that the bankruptcy proceedings before Judge
Bason were prejudiced against INSLAW in any way as a result.

Second, the fact that no conversion motion was ever filed
during that period seems to indicate, we think, either that no
such efforts ever actually took place or that the system actually
worked quite well on behalf of INSLAW. The process of filing a
motion to convert a Chapter 11 proceeding to a Chapter 7
liquidation is a simple and routine matter. If a conspiracy
existed involving high-level Department officials of the type
described by INSLAW, it is difficult to believe that the

96

conspiracy would not be able to cause such a motion to be filed.
The fact no motion was filed, therefore, seems to be more
consistent with a scenario in which no such conspiracy existed.

Conversely, if there were improper efforts to convert the
proceeding and those efforts failed, it seems to be an indication
not that INSLAW's proceedings were unfairly prejudiced by
activities undertaken by Department of Justice officials with
improper motives, but that INSLAW was actually protected from
such improper influences. There is no question that it would be
inappropriate (and perhaps illegal) for a Department of Justice
official to seek a bankruptcy conversion in order, on the
relatively benign side, to further his or her own career (as the
Senate Staff concluded Thomas Stanton, the Director of the
Executive Office of U.S. Trustees, may have done) or, on the more
fantastic side, to further a conspiracy to destroy a company and
steal its most important asset. The fact that such efforts
failed to result in even the filing of a motion indicates that,
to the extent these pressures existed, the United States Trustee
was able to insulate and protect the bankruptcy system, in
general, and INSLAW, in particular, from them. 36

(2) There is no direct evidence that anyone from the
Department of Justice requested or pressured Mr. Stanton to

36 According to INSLAW, EOUST Director Stanton sought to
reassign Harry Jones, an experienced bankruptcy attorney, from
the U.S. Trustee's office in New York to the U.S. Trustee's
office in Washington, D.C., in order to cause the conversion.

Not only was no motion ever filed, Mr. Jones was never
transferred to Washington. In fact, Mr. Jones testified that he
was never even asked to move to Washington on detail.

97

convert the INSLAW proceeding. Everyone involved directly with
the alleged efforts — Mr. Stanton, Jack Rugh, former U.S.

Trustee William White, Assistant U.S. Trustee Harry Jones — deny
that any such pressure was applied. There is no proof whatsoever
that any senior Department of Justice official ever pressured Mr.
Stanton .

Furthermore, the testimony of Judge Cornelius Blackshear
that Mr. White had told him that Mr. Stanton had pressured him to
convert INSLAW's bankruptcy was subsequently recanted by Judge
Blackshear. Although the circumstances surrounding that
recantation raise numerous questions, it is clear that, at the
very least. Judge Blackshear’ s original testimony is called into
considerable doubt. Furthermore, unlike the case with Anthony
Pasciuto's change in testimony , 37 it is unclear what motive Judge
Blackshear would have for changing his testimony. At the time he
changed his testimony, he had already become a bankruptcy judge.
Given his plausible explanation for the recantation, and the
absence of any compelling evidence to the contrary, we believe
that the benefit of the doubt must go in favor of Judge
Blackshear.

37 Mr. Pasciuto testified before Judge Bason that he did not
recall telling the Hamiltons that EOUST Director Thomas Stanton
had pressured the regional U.S. Trustee to convert the. INSLAW
case as claimed by the Hamiltons. He further testified that he
had no personal knowledge of any effort to convert the bankruptcy
and, if he had claimed any to the Hamiltons, he did so in order
to hurt Mr. Stanton. Following a recommendation by the Office of.
Professional Responsibility that he be fired, Mr. Pasciuto
recanted his testimony and claimed that everything he had told
the Hamiltons was true and that Mr. Stanton had, in fact,
pressured the regional U.S. Trustee.

98

I. There Is No Credible Evidence that the Department of Justice

Obstructed the Reappointment of Bankruptcy Judge George

Bason.

George Bason was appointed to serve as the United States
bankruptcy judge in the District of Columbia on February 8, 1984
following the retirement of Judge Roger Whelan. His term expired
on February 8, 1988. Although Judge Bason sought reappointment
to a 14 year term, the Merit Selection Panel, chaired by U.S.
District Court Judge Norma Holloway Johnson, identified another
attorney as its top choice for the position on November 24, 1987.
On December 15, 1987, the Judicial Council recommended the top
three names on the Merit Selection Panel's list to the U.S. Court
of Appeals for the District of Columbia Circuit. The Court of
Appeals selected Martin S. Teel, a Justice Department attorney,
for the position on December 21, 1987, thus foregoing the
reappointment of Judge Bason.

Shortly thereafter. Judge Bason began to allege that the
Justice Department improperly influenced the selection process
and, ultimately, blocked his reappointment in retaliation for his
September 1987 oral ruling in the IN SLAW case. Judge Bason and
INSLAW maintain that proof that the selection process was
unfairly influenced by the Department can be found in the
following facts, among others: Judge Johnson once shared an
office with Deputy Assistant Attorney General Stuart Schiffer;
Judge Bason's administrative skills and record were unfairly
criticized; one of Mr. Hamilton's children allegedly overheard a
Department attorney state in early 1987 that “We've got to get

- 99

rid of this judge"; and the Justice Department sought Judge
Bason's recusal from the case in January 1988 (after Judge Bason
had written to then Chief Judge Patricia Wald of the U.S. Court
of Appeals for the D.C. circuit suggesting the Department had
improperly influenced the process) . These allegations have been
fueled by Mr. Hamilton's claim that a "senior U.S. government
official" who demands anonymity told him that he knows of the
involvement of certain officials in denying Judge Bason's
reappointment .

Following an extensive review of the allegations made by
Judge Bason and Mr. Hamilton regarding the selection process f see
Bua Report 153-189) , the special Counsel concluded that "the
great weight of the evidence clearly supports the conclusion that
there was no attempt by DOJ to obstruct Judge Bason's
reappointment." f id. 188-189.) The Special Counsel also pointed
out that two highly respected federal judges at the center of the
selection process and the decision not to reappoint Judge Bason
— Judge Wald and Judge Johnson — unequivocally deny that the
Justice Department obstructed or attempted to obstruct the
reappointment of Judge Bason, f id. 188.)

The Senate staff reached a similar conclusion: "The Staff
found no proof that the Department of Justice attempted to
influence the selection process so as to deny Judge Bason
reappointment." (Senate Staff Report 57.) The report of the House
Judiciary Committee did not state any conclusion on this subjecti
However, the Committee did state that it "could not substantiate

100

Judge Bason's allegations." (House Report 103.)

We carefully reviewed the criticisms of the Special
Counsel's Report contained in INSLAW's Rebuttal on the
reappointment issue. ( See INSLAW Rebuttal 72-80.) We found those
comments to be rambling and incoherent. The criticisms are
nothing more than innuendo and conjecture, often merely the
repetition of suggestions of impropriety that were addressed and
rejected in the Special Counsel’s Report. They are not
persuasive.

There is, however, one issue raised by INSLAW that warrants
some comment. INSLAW notes that Judge Johnson apparently told
Senate investigators that she "had no contacts with DOJ regarding
Judge Bason" during the selection process and that she
subsequently informed the Special Counsel that she recalled
receiving a transcript of Judge Bason's oral ruling in the INSLAW
proceeding from Judge Royce Lamberth, who at the time was the
Chief of the civil Division for the U.S. Attorney's Office for
the District of Columbia. Judge Johnson initially failed to
recall the contact with Judge Lamberth in discussions with the
Special Counsel as well:

Judge Johnson initially recalled to us that it was one
of the district judges who recommended that she obtain a
copy of the transcript of Judge Bason's oral ruling in
Inslaw . Because information presented to the Panel was
viewed as confidential, Judge Johnson initially declined to
disclose the judge who directed her to the Inslaw ruling
without first consulting that person. Upon contacting the
judge who she believed provided the information, she
discovered that she had been mistaken. It was not that
judge who directed her to Bason's ruling; it was District
Court Judge Royce Lambreth (sic].

(Bua Report 156-157.) Although it appears that at the time Judge
Lamberth brought the September 28, 1987 INSLAW ruling to Judge
Johnson's attention he was still employed at the U.S. Attorney's
Office, he had, in fact, already been nominated to the federal
bench and was sworn in shortly thereafter, on November 16, 1987.
We do not believe that Judge Johnson's credibility is called into
any doubt as suggested by INSLAW as a result of these events.

After carefully reviewing the records maintained by both the
Special Counsel and the House Committee and INSLAW's comments, we
concur with the opinion of the Special Counsel that there is no
evidence of any effort by the Justice Department to improperly
influence the bankruptcy judge selection process.

J. Conclusion

After spending considerable time and resources reviewing the
allegations made by INSLAW and its principals concerning a far
flung conspiracy by Department of Justice officials and others to
steal their software in order to distribute it throughout the
U.S. government and around the world, we are struck by one major
observation: the lack of any credible evidence to support those
charges. It has been over 12 years since the Department of
Justice and INSLAW first entered into a contract for the
installation of PROMIS in the various U.S. Attorneys' offices,
and still we are unaware of any facts that would lead us to
believe any significant part of INSLAW's various conspiracy
theories.

102

INSLAW has relied on three principal sources of information
(along with a significant amount of totally unfounded conjecture,
speculation, and perhaps imagination) to fuel its fight against
the United States government. First , it has repeatedly referred
to the testimony of anonymous sources, all of whom are invariably
described as "reliable, " who refuse to cooperate with our
investigation for fear of reprisal. Despite assurances from the
Attorney General communicated to INSLAW's counsel, none of these
alleged individuals came forward during our review.

Nevertheless, to the extent we felt it was warranted, we
attempted to Verify the alleged claims of these anonymous
sources. Those efforts revealed that virtually none of what
these alleged sources claimed could be verified. As a result, we
conclude that either these sources do not exist, they lack any
first-hand knowledge of the facts to which they allegedly
testified or INSLAW has inaccurately characterized the
information which they possess.

Second . INSLAW relies on the testimony of a few patently
untrustworthy individuals. The basis for INSLAW's conspiracy
claims rests with the stories of Ari Ben-Menashe and Michael
Riconosciuto. It is difficult to imagine a less credible pair.
Two separate congressional investigations found Ben-Menashe to
lack credibility.

Material Omitted Pursuant to
Rule 6(e) of Fed. R. Crim. Proc.

103

Mr. Riconosciuto is no more deserving of our trust. The
federal judge who sentenced him to 30 years in prison on a drug
conviction remarked on his inability to separate fact from
fiction. These individuals are so lacking in credibility and
their charges have received so little corroboration, it is
difficult to believe that INSLAW’s principals truly believe their
tales.

And third . INSLAW has identified a very small number of
additional individuals who have no direct evidence of any
conspiracy but purportedly are privy to circumstantial evidence
of the same. Though these individuals do not suffer from the
same credibility problems of Mr. Riconosciuto and Mr. Ben-
Menashe, it is remarkable that virtually every one of them has a
clear and undeniable personal agenda. For example, Margaret
Weincek has a suit pending against Dr. Earl Brian and his
companies alleging wrongful discharge; John Belton, the former
Canadian stockbroker, has spent much of the past decade suing his
former employer and Dr. Brian, alleging constructive dismissal
and conspiracy to commit stock fraud; and Reynaldo Liboro, the
former office manager for INSLAW's bankruptcy counsel who claims
that firm was involved in a conspiracy to drive INSLAW out of
business, is currently serving a five-year sentence for
embezzling funds from that very firm. Although we did not try to
verify all of the claims made by these individuals, we were
unable to verify those that we did investigate.

104

In contrast, INSLAW's charges have been categorically denied
by everyone that was allegedly involved in the various
conspiracies. We are mindful of the fact that we would expect
conspirators to deny their involvement in an illegal conspiracy.
However, we do not accept INSLAW's basic premise that the denial
of involvement in a conspiracy following unsubstantiated charges
that such a conspiracy exists is proof of both the conspiracy and
that individual's involvement. After 12 years, it is time to put
an end to the bizarre logic — a sort of strange Orwellian
version of Lewis Carroll reasoning — that has given life to
these charges for so long.

INSLAW has provided us with no credible direct evidence of a
conspiracy of the type that they allege. Nor is there any
significant documentary evidence of such a conspiracy. Finally,
nearly all of the circumstantial evidence which INSLAW puts
forward withers under scrutiny.

If, on the other hand, one were to accept all of INSLAW's
conspiracy charges, then one would have to believe that all of
the following individuals, along with many others, committed
perjury in sworn statements, lied to federal or Congressional
investigators or, in a few cases, were unwitting pawns in the
perpetuation of the conspiracy;

Judge Patricia Wald of the United States Court of
Appeals for the District of Columbia Circuit

District Judge Norma Holloway Johnson

District Judge D. Lowell Jensen

Vice Admiral D. M. Bennett, U.S. Navy Inspector General

105

Deputy Assistant Attorney General Mark Richard

Deputy Assistant Attorney General Janis Sposato

Deputy Assistant Attorney General John Keeney

Deputy Assistant Attorney General Stuart Schiffer

Deputy Assistant Director for the FBI's Technical Services
Division Kier T. Boyd

Department of the Interior Administrative Law Judge James L.
Byrnes

Former Acting FBI Director John Otto

Former CIA Deputy Director Richard Kerr

Former Deputy Assistant Attorney General James Knapp

Former Indio, California Police Chief Sam Cross

Former Jerusalem District Attorney Joseph Ben Orr

Professor Dorothy Denning

Professor Randall Davis

James Johnston

Phillip White

Gordon Zacrep

Louise Goldsworthy

Philip Cammera

Sandra Spooner

Dominic Laiti

Paul Wormeli

Marilyn Titus

Marilyn Jacobs

Jonathan Ben Cnaan

Daniel Tessler

106

Richard D'Amore

Patricia Cloherty
James Walker
Floyd Bankson

We have no reason to question the truthfulness of the
individuals included in the above list. It should also be noted
that the list is not exclusive, there are many other credible
individuals who have denied various of INSLAW's allegations.

V. The Weight of the Evidence Indicates that J. Daniel Casolaro
Committed Suicide 38

Joseph Daniel {"Danny") Casolaro was a free-lance writer who
had been working on a story involving alleged links between
various Washington ’'scandals" of the 1980s, including INSLAW, the
Bank of Credit and Commerce International (BCCI) , the October
Surprise, the Iran-Contra affair, the Iraqi arms procurement
network, and the collapse of the savings and loan industry. Mr.
Casolaro’ s theory was that these scandals had all been the
handiwork of a shadowy group of people whom he referred to as the
"Octopus." Casolaro began working on the story full-time in mid-
1990.

3 * We are aware of the pain and suffering the family and
friends of a suicide victim must experience. While we are
obligated to revisit the difficult circumstances surrounding Mr.
Casolaro 's death as the result of the controversy involving
INSLAW's relationship to the Department of Justice, we sincerely
regret any additional pain this review may cause his family.

107

On Saturday, August 10, 1991, Mr. Casolaro was found dead in
room 517 of the Sheraton Inn located in Martinsburg, West
Virginia. His body was in the bathtub, and both of his wrists
had been slashed. After a brief investigation at the scene, the
local police department and the county coroner concluded that the
cause of death was suicide. The coroner released the body to a
local funeral home, where the body was embalmed. The Martinsburg
Police Department sent a teletype to the Fairfax County Police
Department in Northern Virginia requesting that Mr. Casolaro' s
relatives be notified of his death.

Mr. Casolaro 's relatives, however, were not notified until
Monday morning, August 12, 1991. His brother, a Fairfax county
physician, told the Martinsburg police at that time about Mr.
Casolaro 's work on the "Octopus" story and suggested that many
people would have had a motive to kill him. He explained that
Mr. Casolaro had told people he was travelling to Martinsburg to
meet a key source. He also insisted that an autopsy be conducted
and questioned how Mr. Casolaro' s body could have been embalmed
so quickly, without either the knowledge or consent of Mr.
Casolaro *s family. Soon after the call from Mr. Casolaro 1 s
brother, the Martinsburg Police Department was deluged with
inquiries from the news media, from friends of Mr. Casolaro and
from congressional investigators. A series of questions were
raised about the cause and circumstances of Mr. Casolaro 's death.

Faced with this sudden and intense public interest in the
case, # the West Virginia authorities ordered an autopsy. The West

108

Virginia Deputy Chief Medical Examiner performed the autopsy on
August 13-14, 1991, and determined the cause of death as suicide.
The autopsy also disclosed that Mr. Casolaro had been suffering
from multiple sclerosis and arteriosclerosis. The autopsy found
no evidence suggesting that he had been murdered.

The autopsy findings, however, did little to quell the
controversy over Casolaro' s death. The media and others raised
many questions about the circumstances of his death and the
adequacy of both the police investigation and the autopsy. Many
suggested that Mr. Casolaro had been murdered because he was
about to expose the "truth" about the "Octopus." Various
theories appeared in the media about "who killed Danny Casolaro."

Faced with these continuing questions about its
investigation, the Martinsburg Police Department reopened the
case and conducted a second, more intensive investigation. On
January 25, 1992, West Virginia authorities announced that their
additional investigation had led to the conclusion that Mr.
Casolaro indeed had committed suicide, and that the case was
closed.

Rumors and speculation continued to circulate despite the
conclusions reached by the Martinsburg police. On September 10,
1992, the House Judiciary Committee issued its report on the
INSLAW affair. The report raised many questions about the
circumstances of Mr. Casolaro' s death and recommended the
appointment of an Independent Counsel to investigate six specific
issues involving INSLAW, including "the lingering doubts over

109

certain suspicious circumstances surrounding the death of Daniel
Casolaro. "

After reviewing the Nartinsburg Police Department's
investigation of Mr. Casolaro's death, the Special Counsel
concluded that there was no basis for challenging the conclusion
that he had committed suicide. (Bua Report 246-250.) In its
rebuttal, INSLAW was highly critical of the Special Counsel's
review of this matter and was particularly critical of the
Special Counsel's failure to interview certain witnesses.

In light of the intense media focus and the concerns raised
by the House Judiciary Committee, we undertook a substantial
review and investigation of the circumstances surrounding Mr.
Casolaro's death. Based on that review and investigation, we
conclude that Mr. casolaro committed suicide.

A. Scope of Review

Our review consisted of two phases. During the first phase,
we reviewed in detail the West Virginia investigations into Mr.
Casolaro's death. We reviewed all the police reports and the
autopsy report as well as the documents generated during an
unsuccessful lawsuit the Casolaro family filed against the
coroner and the funeral home regarding the embalming of
Casolaro's body. Included among those documents were the sworn
depositions, taken by the Casolaro family's attorneys, of the
coroner and funeral home personnel. We also interviewed the
police officers involved in the investigation of Mr. Casolaro's

110

death as well as the Deputy Chief Medical Examiner who had
conducted the autopsy.

During the second phase of the review, we pursued various
questions that had been raised in the media and in the House
Judiciary Committee Report and attempted to answer other
questions raised by casolaro's family. During this phase, we
conducted numerous interviews of Casolaro's friends, family and
associates in Virginia, West Virginia, Washington, D.C., Maryland
and California. We obtained documents from various sources
throughout the United States, including many of Mr. Casolaro's
personal papers on file at the Investigative Reporters' and
Editors' Association at the University of Missouri.

We also obtained much of the physical evidence originally
found in the hotel room and elsewhere and had the FBI laboratory
conduct additional tests on some of that evidence. We examined
Mr. Casolaro's background and had the FBI's Behavioral Sciences
Unit at the FBI Academy in Quantico, Virginia conduct an
equivocal death analysis, or "psychological autopsy." Other
experts were consulted as well, including a former President of
the National Academy of Forensic Sciences and a George Washington
University Law Professor who had previously reviewed the Casolaro
autopsy report on behalf of a group of Washington-based
journalists.

We also reviewed documents at the Central Intelligence
Agency and at FBI headquarters. In addition, we met with the
Hamiltons and INSLAW's counsel, received documents and other

111

information from them and followed various leads they provided.
Finally, we reviewed all the telephone calls and mail received by
the producers of the television program "Unsolved Mysteries,"
following the airing on March 11, 1993 of a segment about Mr.
Casolaro's death.

B. Casolaro's Death

1. Discovery of the Body

Mr. Casolaro arrived at the Sheraton Inn in Martinsburg,

West Virginia on Thursday, August 8, 1991. He was supposed to
have checked out from his room, number 517, by 12:00 p.m. on
Saturday, August 10, 1991. At about 12:59 p.m., Sharon Palmer,
the maid assigned to cleaning the fifth floor, knocked on Mr.
Casolaro's door and got no answer. She used her passkey to enter
the room. She noticed the bathroom door was halfway open. She
looked inside and saw blood on the floor and blood on a towel.

She did not go inside the bathroom, but left and called for help.
Another maid, Linda Williams, arrived and saw the blood on the
bathroom floor, but did not enter the bathroom. Ms. Williams
left and returned with hotel employees Barbara Bettinger, David
Avella, Sandy Bogert, and Eric Weidman. Mr. Avella called the
police.

Minutes later Patrolman Glenn Macher of the Martinsburg City
Police Department arrived. He ordered all the hotel employees
who had just been inside the room to go the hotel manager's
office and wait to be interviewed by other officers. The

112

patrolman then went inside Mr. Casolaro's room. Within minutes,
Martinsburg Police Captain Ted Anderson, Detective John McMillen,
Patrolmen Shannon Armel and Terry Stanley and paramedics arrived.

2 • The Death Scene

Casolaro's Body

According to police reports and witnesses we interviewed,

Mr. Casolaro's nude body was in the bathtub. The water was
bloody and cold. The tub was about half to three -fourths full.
Mr. Casolaro was sitting with his feet toward the faucet. He was
leaning against the side of the tub with his head slumped over
the side. His right arm was hanging over the side of the tub,
and his right hand was lying flat on the floor. His left hand
was submerged under water, tucked beneath his left thigh. Both
of Mr. Casolaro's wrists had cut wounds. The fingernails on the
thumb, forefinger and middle finger of his right hand appeared to
have been chewed.

A used shoelace was draped loosely around Mr. Casolaro's
neck. Another used shoelace was found inside the bathtub. Two
white hefty trash bags were floating in the bathtub. A single-
edge razor blade was inside the bathtub. An empty can of
Milwaukee's Best beer was also inside the tub.

The Bathroom

The wrapper from the razor blade was resting against the
side of the bathtub. Next to the bathtub, on the bathroom floor,
there was a broken drinking glass and a half-full bottle of
"Caves Alianca,** a Portuguese white wine. There was a bloody

towel on the floor next to the tub. There were bloodstains on
the tile around the tub, on the bathroom floor and on the toilet
seat. Some bloody water had splattered across the small bathroom
to the sink area.

There was an ashtray on top of the toilet tank. Three
cigarette butts were in the ashtray, and a pack of Carlton
cigarettes was on the toilet tank next to the ashtray. The
bathroom was later dusted for fingerprints. Two prints removed
from the bathroom sink were identified later as Casolaro's left
index and left middle fingers.

There was no sign of any struggle having occurred inside the
bathroom.

The Bedroom

The police inspected the bedroom area. They found no sign
of forced entry, no sign of any struggle inside the room, and no
sign that anyone else had been inside the room. The door to the
adjoining room (room 515, occupied by two visitors from
Pennsylvania who had come to Martinsburg for a soccer tournament,
a 7 2 -year old woman and 70 year-old man) was locked, and the
safety chain was secure. The bedspread was partially turned
down, but the sheets were not turned down. There was no blood in
any part of the hotel room other than the bathroom.

Mr. Casolaro's clothes were laid out on top of the bed.

None of the fixtures in the room had been broken or knocked over.
Mr. Casolaro's personal effects appeared to be intact. His
wallet and driver's license were found inside his coat pocket.

114

There was no sign that anyone had gone through any of Mr.

Casolaro 's belongings. The police described the scene as
••quiet . H

There was an unused ashtray inside the bedroom. It had a
fingerprint on the bottom, but the police were unable to identify
that fingerprint. The trash can inside the bedroom contained a
Sheetz Convenience Store coffee cup. On top of it were five
empty cans of Milwaukee's Best beer,. The police later conducted
hair and fiber analyses on various items recovered in the room,
but no evidence was developed indicating that anyone other than
Mr. Casolaro had been inside the room before he died.

The police found a large black tote back in the bedroom.
Inside the bag were, among other items, an empty bottle of
Vicodin pills (which the police later determined had been
prescribed for relief of pain following oral surgery performed on
Mr. Casolaro in 1988) ; one box of Hefty trash bags (with two bags
missing) ; two green lawn-type garbage bags; one unopened bottle
of "Caves Alianca" white wine; one corkscrew; and three packs of
Carlton cigarettes.

The police found, on the coffee table, a box of razor blades
with four unused single-edge blades inside. The box had room for
five blades. The blades matched the single blade found inside
the tub.

The police did not find a briefcase or any documents in the
hotel room. They did find various credit card receipts,
including two receipts from the nearby Stone Crab Inn for

115

Thursday, August 8 and Friday, August 9.

The Suicide Note

The police also found a suicide note, written on the fourth
page of a legal pad sitting on the coffee table, next to the box
of razor blades. The top three pages in the pad were blank and
had been folded over the top and underneath the back of the legal
pad. The note said:

To my loved ones, Please forgive me — most especially

my son — and be understanding, God will let me in.

The police later determined through handwriting and ink
comparisons that Mr. Casolaro wrote the note with a pen that was
on the coffee table near the legal pad. His right thumbprint was
the only fingerprint found on the legal pad. 39

Casolaro 1 s Car

The police found Mr. Casolaro* s car keys and located his
car, a 1981 Honda Accord, in the Sheraton hotel parking lot.

There was no sign that the car had been broken into or searched.
They lifted two of Mr. Casolaro* s fingerprints from the driver's
side window. They also found a pack of Carlton cigarettes in the
car. The car was impounded and sent to a local body shop for
safekeeping.

39 Some individuals have suggested that Mr. Casolaro may
have been forced to write the suicide note, and that he was
leaving a clue by making the note uncharacteristically brief and
by the reference to God "letting him in." Proponents of this
theory note that, as a Catholic, Mr. Casolaro would have known
that suicide was a sin, so he must have used that phrase to tip
his friends that he was not dying voluntarily. We uncovered no
evidence supporting this theory.

116 -

3 . Interviews of Hotel Employees

While the patrol officers were examining the hotel room,
Captain Anderson and Detective McMillen interviewed the hotel
employees who had discovered Casolaro's body. None of the
employees, including the maids, had seen anything suspicious that
morning. None had seen anyone enter or leave Mr. Casolaro's
room. The last employee who had seen Mr. Casolaro alive was
Barbara Bettinger, who had talked with him outside his room
Friday afternoon.

4 . The Coroner's Investigation

Thirty minutes after the police arrived, Berkeley County
coroner Sandra Brining and her husband, Martinsburg city
paramedic David Brining, entered room 517. Mr. Brining
photographed Mr. Casolaro's body and the bathroom area. Ms.
Brining examined the body. She noted eight cuts on the underside
of Casolaro's left wrist and four cuts on the underside of his
right wrist. There was also a bruise on the inner part of the
upper left arm. There were no other visible signs of trauma to
the body. "Light" rigor mortis was present in both arms. Livor
mortis was present, but had not yet set, in the buttocks, neck,
face, arms and legs.

During Ms. Brining 's examination of the body, the bloody
bathtub water was drained. Ms. Brining failed to preserve a
sample of the water.

Ms. Brining classified the death as a suicide, and contacted
Brown's Funeral Home in Martinsburg to transport the body.

117

Funeral home employees John Arvin and Robert Fields arrived at
room 517 at approximately 2:00 p.m. The bathroom door was
removed to allow room for the body to be taken out of the room.
The body was placed in an ambulance and taken to Brown's Funeral
Home in Martinsburg.

5. Handling of Death Scene Following Removal of Body

After the body was removed, the Martinsburg police locked

the room but failed to seal it formally.

On Monday morning, August 12, 1991, Detectives Catlett and
McMillen returned to room 517 to conduct a further investigation
after Casolaro's family had alerted them about Mr. Casolaro's
work and the threats he had allegedly received. Although the
police had not officially sealed the room when they left Saturday
afternoon, the hotel manager, Sam Floyd, had kept the room locked
for the remainder of Saturday and all day Sunday. Detective
McMillen told us that the hotel room was in exactly the same
condition as it had been when he and the other officers left it
Saturday. The room had not been cleaned. According to the
detective, nothing had been rearranged or disturbed. There was
no sign that anyone had been inside the room.

6. Examination and Embalming of the Body at the Funeral

Home

Ms. Brining spent two hours examining Mr. Casolaro's body at
the funeral home on Saturday afternoon. Patrolman Armel arrived
at Brown's Funeral Home at approximately 3:30 p.m. , after the
examination had started. He watched as funeral home employee
Robert Fields drew a blood sample directly from Casolaro's heart.

118

Ms. Brining and Mr. Fields asked Patrolman Armel to notify Mr.
Casolaro's next-of-kin. Patrolman Armel relayed that request to
Detective McMillen, who had returned to the station.

Patrolman Armel asked Ms. Brining for the cause of death,
and she said that Mr. Casolaro had bled to death. She determined
that the wounds to the wrists had been self-inflicted, and that
the manner of death was suicide.

As Ms. Brining and Patrolman Armel were preparing to leave,
Charles Brown, the owner of Brown's Funeral Home, asked Ms.
Brining if the body could be embalmed. Ms. Brining said that she
was releasing the body to the funeral home, that an autopsy would
not be conducted because the death was a suicide, and that the
body could be embalmed. Mr. Fields then embalmed the body.

The decision to permit the embalming of Casolaro's body
before an autopsy could be performed has been the subject of much
controversy in the press and elsewhere. We have concluded that
the decision was not unreasonable in light of the physical
evidence suggesting that Mr. Casolaro had committed suicide and
the well-established practice in the Martinsburg area of
performing “courtesy" embalmings for decedents from other
localities. We also note, however, that Ms. Brining should have
waited a few more hours before releasing the body to see whether
Casolaro's next-of-kin had been notified. Under West Virginia
law, a deceased's body may not be embalmed unless the authorities
have first made “due inquiry" as to the desires of the next-of-
kin. West Vir. Code Ann., § 30-6-8 (1993). As discussed in the

119

next section, the Martinsburg Police requested the Fairfax County
police to notify Casolaro's next-of-kin at 3:30 p.m., before the
embalming. As described below, the Fairfax Police reported back
at 5:00 p.m., after the embalming had started, that they had been
unable to do so. Although Ms. Brining should have waited until
after the Martinsburg police had heard back from the Fairfax
County police, ultimately it made no difference as the body would
have been embalmed once the Fairfax County police had reported
they were unable to locate any next-of-kin.

We are unaware of any evidence that suggests that the
decision by Ms. Brining approving the embalming of the body was
made to further any type of cover-up or conspiracy. 40 In fact,
the decision appears to be consistent with the custom and
practice in the Martinsburg area. During a lawsuit filed by
Casolaro's family against Brown's Funeral Home, Berkeley County,
and the City of Martinsburg, an attorney for Casolaro's family
took the sworn deposition of Mr. Brown. In his deposition, Mr.
Brown testified that "courtesy embalmings" are standard procedure
in Martinsburg for decedents from other localities. f Casolaro, et
al. . v. Brown Funeral Home, et al. . No. 92-C-721, Circuit Court

40 The media have reported that Ms. Brining and Mr. Brown
had a dispute over whether she had authorized him to embalm
Casolaro's body. Our investigation found that they both agreed
that she did authorize the embalming. In her deposition during
an unsuccessful suit filed by the Casolaro family, Ms. Brining
testified that, as she was leaving the funeral home, she told Mr:
^rown that "the body is released." (Deposition of Sandra
rising, Jan. 14, 1993 at 92). Mr. Brown then asked whether the
Dd, could be embalmed, and Ms. Brining said yes. Mr. Brown
^ni med Ms. Brining 's recollection.

120

for Berkeley County, W. Va., Deposition of Charles Brown,

Sept. 13, 1993, at 27, 35.)

Furthermore, the embalming of the body did not have the
adverse impact on the subsequent autopsy that has been
speculated. Embalming typically precludes the ability to obtain
accurate toxicological studies of bodily fluids. Here, however,
the embalming did not interfere with the autopsy as the medical
examiner and toxicologist had access to four separate bodily
fluid samples and organs that had been unaffected by the
embalming: (1) the blood sample that Mr. Fields had taken

directly from Casolaro's heart, before the embalming had been
performed; (2) a small amount of urine that had not been
evacuated at the time of death because of the submersion of
Casolaro's body in the bath water, and that had not been tainted
due to Mr. Fields' failure to inject embalming fluid into the
bladder; (3) a small amount of vitreous fluid from behind the eye
sockets; and (4) the liver, which Mr. Fields had entirely missed
when he failed to insert the trocar (embalming tool) into that
organ.

7. Notification of Next ~of -Kin

At 3:30 p.m. on Saturday, August 10, Detective McMillen
called the Fairfax County (Virginia) Police Department and
notified them of Mr. Casolaro's name, address, and apparent
suicide. He requested that the Fairfax Police Department notify
Mr. Casolaro's family. The Fairfax police said they could not do
so unless they were notified by teletype. At 4:00 p.m..

121

Detective McMillen sent the requested teletype but received no
acknowledgement. A few minutes later he sent a second teletype.

According to police records, a Fairfax County patrol car
drove to Mr. Casolaro's house at approximately 4:30 p.m. The
officer knocked. When no one answered, the officer left his
business card on Mr. Casolaro's door. The officer returned to
the station and called Detective McMillen at 5:00 p.m. Detective
McMillen asked the officer to attempt to notify Casolaro's next-
of-kin and to ask them to contact the Martinsburg police to
provide instructions regarding funeral arrangements.

Inexplicably, the Fairfax County police made no effort to
locate any of Mr. Casolaro's relatives, other than going to his
house and leaving a business card. Fairfax police would have
found the name of Dr. Tony Casolaro, Mr. Casolaro's brother, in
the local phone book if they had looked. The anguish that was
ultimately caused by the belated notification could easily have
been and should have been avoided.

Finally, on Monday, August 12, the Martinsburg police
authorities did what the Fairfax police department should have
done two days earlier. Detective Sergeant Swartwood called
directory assistance for Fairfax County, received the listing for
Dr. Tony Casolaro, and called the number. Mr. Casolaro's mother
was at Dr. Casolaro's house and answered the phone. Detective
Sergeant Swartwood notified Mrs. Casolaro of her son's death at
that time.

122

C. The Autopsy

Shortly after Mr. Casolaro's family was notified of his
death. Dr. Tony casolaro informed West Virginia authorities that
his brother had been working on a sensitive story and that he had
received death threats. Dr. Casolaro urged the police to conduct
an autopsy. Detective Sergeant Swartwood relayed this
information to Ms. Brining who agreed to contact the West
Virginia Deputy Chief Medical Examiner, Dr. James L. Frost, to
arrange for an autopsy. Casolaro's body was moved to Morgantown,
West Virginia on Tuesday, August 13, 1991. That afternoon. Dr.
Frost conducted preliminary and fluoroscopic examinations of the
body. The results were negative. The next morning, August 14,
1991, Ms. Brining, Patrolman Armel, and Patrolman Stambaugh
traveled to Morgantown to observe the autopsy.

The summary of the findings of the autopsy that follows is
based on a review of the autopsy report and interviews of Dr.
Frost and others who were involved with or observed the autopsy.

Dr. Frost spent a considerable amount of time examining Mr.
Casolaro's wrists. The undersides of both wrists had deep cuts,
though the depth was not extraordinary for a suicide, according
to Dr. Frost. The angles of the cuts were consistent with the
wounds being self-inflicted. Mr. Casolaro was right-handed.

There were four cuts on Casolaro's right wrist and eight on his
left. According to Dr. Frost, Mr. Casolaro probably made the
cuts on his left wrist first. The uppermost cut on the left
wrist appeared to be a superficial cut. Dr. Frost told us that

123

the superficial cut on the left wrist was not consistent with a
so-called "hesitation cut," something that certain forensic
pathologists look for in suicide cases. In Dr. Frost's view, the
lack of a hesitation cut could be cited as evidence that the
victim was particularly determined to commit suicide.

The autopsy revealed that Mr. Casolaro injured one of the
tendons in his left wrist with a particularly deep cut. However,
that injury would not have deprived him of the motor ability in
his left hand to grasp the razor and cut his right wrist.
According to Dr. Frost, that is exactly what Mr. Casolaro did.

The other cuts were also deep, but not so deep as to be
suspicious, according to Dr. Frost.

The autopsy found no indications that Mr. Casolaro had been
involved in a struggle. Three of the fingernails on his right
hand had been chewed. Mr. Casolaro 's brother. Dr. Tony Casolaro,
told us that his brother did not bite his nails. However, the
autopsy uncovered no evidence that anyone else bit his nails or
that he had bitten the nails during a struggle in the hotel room.
There was also a faint contusion on Mr. Casolaro 's left anterior
bicep. Dr. Frost determined that the bruise was probably caused
two days before Mr. Casolaro* s death. There were other faint
blue marks and contusions on the body, but those were determined
to be postmortem skin discolorations caused by the embalming
process .

Dr. Frost also noted during the autopsy that Mr. Casolaro' s
onque was normal, indicating that he did not appear to have

124

ingested any foreign substance. There was no indication of force
having been applied to his mouth or lips. There was no sign of
choking, strangulation, or drowning. No water was found in Mr.
Casolaro's lungs.

The neuropathologist, Dr. Sydney S. Schochet, examined
Casolaro's brain and determined that he had been suffering from
multiple sclerosis. Dr. Schochet opined that Mr. Casolaro
probably had been experiencing vision problems. In addition,
the autopsy revealed that Mr. Casolaro was suffering from
"moderately severe" arteriosclerosis.

Dr. Frost determined that the cause of Mr. Casolaro's death
was "exsanguinating hemorrhage from multiple incised wounds to
the wrists." He concluded that the manner of death was suicide.
He estimated that the time of death was between 7:00 a.m. and
8:00 a.m. on Saturday, August 10, 1991. Dr. Frost told us that
Mr. Casolaro probably lost consciousness within five to eight
minutes of cutting himself and that he likely died within 15
minutes.

Dr. Frost also submitted the blood sample that had
previously been taken from the heart, the urine and vitreous
fluids and a liver sample (none of which had been tainted by the
embalming fluids) to the West Virginia toxicology laboratory for
analysis. The results of the toxicology studies did not alter
Dr. Frost's conclusions as to the cause and manner of death.
Rather they were fully consistent with suicide.

125

The toxicology tests performed by Dr. Cash revealed several
things. First . Mr. Casolaro had an alcohol content of .04 in his
urine. According to Dr. Frost, that alcohol level is consistent
with the metabolization rate for a man of Mr. Casolaro' s height
and weight consuming the six beers found in the hotel room as
well as some of the white wine during the night and early morning
hours before his death. No alcohol was found in the blood sample
taken from the heart. Second , trace amounts of the chemical
components for Vicodin were found in some of the samples. As
indicated above, an empty bottle of Vicodin was found in Mr.
Casolaro' s luggage in the hotel room. And third , trace amounts
of a tricyclic anti-depressant medication were also present. The
tricyclic was never traced, and we were unable to determine its
origins. However, the amount was insignificant. Dr. Cash also
conducted a series of tests for the presence of a variety of
"exotic" drugs or any other substance that could have been used
to render Mr. Casolaro unconscious or that could have contributed
to his death. All those tests were negative.

Dr. Cash also tested the wine found in the open bottle
adjacent to the bathtub for the presence of any drugs. That test
was also negative. 41

41 Several months after the autopsy was conducted, a group of
journalists in Washington, D.C. asked Professor James E. Starrs,
a noted forensic pathology expert at the George Washington
University law school, to review Dr. Frost's autopsy report.
Professor Starrs agreed to do so. In an interview with the
Was hington Business Journal (week of Nov. 9-15, 1992, p. 13),
rofessor Starrs stated that he agreed with Dr. Frost that Mr.
tsc*aro's wounds had been self-inflicted. He also stated that
doubted whether any additional scientific techniques would

126

D. Additional Police Investigation

After learning from Dr. Casolaro and others about the nature
of Mr. Casolaro* s work and the threats that allegedly had been
directed at him, the Martinsburg police began a more substantial
investigation into the matter. We carefully reviewed the records
of that investigation and conclude that it was sufficient given
the nature of the allegations. Furthermore, we concur with the
conclusion reached by the Martinsburg Police Department that the
results of that investigation support the conclusion that Mr.
Casolaro took his own life.

The following is a summary of some of the important findings
of that investigation:

• The police located and interviewed the occupants of
rooms 514, 515, 516, 519 and 520 on the night of
August 9-10, 1991. None of the individuals staying in
those rooms recalls hearing any unusual noises coming
from room 517, Mr. Casolaro *s room, either that evening
or the next morning. Nor did any of them recall seeing
anyone entering or leaving room 517 during the morning
of August 10.

• The occupant of room 519, a man from St. Paul,
Minnesota, had had several drinks with Mr. Casolaro on
Thursday, August 8. Police noticed during their
interview of him that his wrist was bandaged. He told
the police officers conducting the interview that he
had hurt himself playing volleyball. The officers were
able to verify that story.

have changed the outcome of the autopsy. Professor Starrs agreed
with Dr. Frost that the small contusions on Casolaro' s body were
caused by the embalming fluid, although he criticized the West
Virginia authorities for embalming the body so quickly.

Professor Starrs also noted that the suicide note was typical in
that it was unsigned and made apologies to Casolaro 's family.
Professor Starrs summarized his view of the case by saying, **[I]f
this was a homicide, it would be the most singularly remarkable
murder on record, either in fiction or nonfiction."

127

• During the interviewing of all of the hotel employees
who may have had contact with Mr. Casolaro, a front
desk employee told the police that Mr. Casolaro may
have had a brown briefcase when he checked into the
hotel. No other hotel employee recalled seeing Mr.
Casolaro with a briefcase. Police were unable to
locate any briefcase or documents during searches of
Mr. Casolaro' s hotel room, his car, the hotel or the
area surrounding the hotel.

• The hotel manager stated that there were six keys for
room 517. One key was found in the room among Mr.
Casolaro' s belongings during the initial search of the
room on August 10. The remaining five keys were found
at the front desk.

• The razor blades found in the bathtub and in the
bedroom were manufactured by Techni-Edge Manufacturing
Corporation in New Jersey. Although they checked
several retail outlets in the Martinsburg and Fairfax
County areas, the Martinsburg police were unable to
determine where the blades had been purchased. The
West Virginia State Police Crime Laboratory was unable
to lift any fingerprints from the blade found in the
bathtub because it had been immersed in water. (We
asked the FBI laboratory to attempt to lift a
fingerprint from the blade, but they too were unable to
do so. )

• On August 21, 1991, during a search of Mr. Casolaro* s
home, police found two unopened bottles of "Caves
Alianca" white wine under the kitchen sink. The
bottles matched those found in the bathroom of the
hotel room and in Casolaro 's luggage. The Martinsburg
police determined that the Giant Supermarket chain in
Northern Virginia sells Caves Alianca wine. The brand
is unavailable in West Virginia.

• During their search of Mr. Casolaro 's house, the police
found two tennis shoes from two different pairs — one
Nike and one Reebok — that were each missing a
shoelace. The shoes were in the closet in the upstairs
bedroom. The police asked the West Virginia State
Police Crime Laboratory to attempt to match the two
laces found at the death scene with the two shoes from
Mr. Casolaro' s house. The crime laboratory was unable
to make a definite match, although a visual comparison
of the laces and the shoes seemed to indicate that the
eyelet marks on the laces matched the eyelets on the
shoes. (We had the FBI laboratory conduct a variety of
tests on the laces and the shoes to attempt to match
them, but the results were inconclusive.)

128

On August 29, 1991, and on September 27, 1991, the
Martinsburg police received copies of a passport photo
of Hassan Ali Ibrahim Ali from various individuals.

This may have been the same photograph that Mr.

Casolaro had shown to Ben Mason in his basement office
on Wednesday, August 7. (See discussion below.) There
is no evidence that Mr. Casolaro ever met Ibrahim, or
that Ibrahim — whoever he is — had anything to do
with Mr. Casolaro *s death.

The West Virginia State Police Crime Laboratory
determined that the blood stains found in the bathroom
in room 517 matched Mr. Casolaro' s blood.

The West Virginia State Police Crime Laboratory
determined that the handwriting on the suicide note
matched Casolaro *s known handwriting. The ink used to
write the note matched the ink in the pen found next to
the suicide note. Mr. Casolaro 's right thumbprint was
found on the legal pad containing the suicide note.

• The West Virginia State Police Crime Laboratory
determined that Casolaro' s fingerprints matched those
lifted from the bathroom sink. The fingerprint found
on the unused ashtray in the hotel bedroom could not be
identified.

• The West Virginia State Police Crime Laboratory
determined that the wine found in the open "Caves
Alianca" bottle on the bathroom floor was untainted, as
were the wine traces on the broken drinking glass on
the bathroom floor.

Blood Spatter Analysis

In December 1991, the Martinsburg police and the Berkeley
County Prosecuting Attorney asked Dr. Henry C. Lee, the Chief
Criminalist at the Connecticut State Crime Laboratory and a
nationally recognized blood spatter expert, to conduct a blood
spatter analysis of the bathroom where the body had been found.
The Martinsburg police provided Dr. Lee with the death scene
photographs, as well as a videotaped reenactment of the death the
police had prepared with Dr. Frost's assistance on December 12,

129

1991 in the room where Mr. Casolaro had died. After reviewing
Dr. Frost's autopsy report and other evidence, Dr. Lee created a
three-dimensional photographic montage from the photographs taken
of Casolaro *s body and the bathroom on August 10, 1991. Dr. Lee
issued his report on January 24, 1992.

Based on the pattern of the blood found in the bathroom. Dr.
Lee theorized that Mr. Casolaro filled the tub with an amount of
water; poured himself a drink of wine, and sat the glass on the
side of the bathtub; sat down on the side of the bathtub; cut his
wrists with the razor blade; and then sat inside the tub. Mr.
Casolaro then probably got into the bathtub and placed one of the
white hefty bags over his head as added insurance that he would
die. (According to his close friend, Ann Klenk, Mr. Casolaro had
discussed with her several months before his death how author
Jerzy Koz inski had committed suicide in a bathtub by tying a
plastic bag over his head.)

Dr. Lee theorized that Mr. Casolaro next submerged his
wrists into the water and bled into the water for a few moments.
According to Dr. Lee, he probably became extremely uncomfortable
with the bag over his head and pulled it off, flinging bloody
water across the floor and to the sink opposite the bathtub. Mr.
Casolaro then attempted to stand up in the tub, bracing himself
against the tile wall. By that time, however, he had lost too
much blood. According to Dr. Lee, he probably become woozy and
slumped back into the tub, causing bloody water to slosh over the
ide of the tub and onto the bathroom floor. As he fell back

130

down into the tub, Mr. Casolaro's arm knocked the drinking glass
onto the floor, where it broke. His right arm hung outside the
tub as he slumped against the side of the tub. His head came to
rest on the side of the tub.

Dr. Lee concluded that the blood spatter analysis he had
conducted established that Mr. Casolaro's death was "not
inconsistent with a suicide."

Financial Review

The police also reviewed Mr. Casolaro's financial condition.
They were unable to find any evidence that he had earned any
income during the months before he died. When the Martinsburg
police searched his house, they found his checkbook and checking
account statements. The documents indicated that Mr. Casolaro
had recently received loans from family members.

The police also found a copy of the promissory note for Mr.
Casolaro's house. The note indicated that a balloon payment of
$178,790 was due August 9, 1991. The police checked with the
mortgage company and learned that Mr. Casolaro had received a 30-
day extension, to September 8, 1991, on the payment. The police
also found Mr. Casolaro's July 1991 phone bill, in the amount of
$922.00.

The Martinsburg police officially concluded their
investigation on January 25, 1992, after expending over 1,000
aggregate hours on the case. We believe that the criticisms
directed at that investigation are not warranted. In our
opinion, the Martinsburg City Police Department conducted a

131

thorough, professional investigation. Although Ms. Brining
should not have authorized the embalming of Casolaro's body
before hearing back from the Fairfax County police and although
the Martinsburg police should have sealed the hotel room, those
mistakes had no significant adverse impact on the investigation.
We also believe that Dr. Frost, Dr. Cash, and Dr. Schochet
performed excellent autopsy, toxicology, and neuropathology
studies.

E. Our Investigation
1. " The Octopus "

During our investigation into Mr. Casolaro's death, it
became clear that many of the sources for Mr. Casolaro's theories
about the government's involvement with INSLAW were the same as
those identified by the Hamiltons, though Mr. Casolaro's theory
of "the Octopus" involved an even more far-flung conspiracy than
that advanced by INSLAW. In a November 1990 book proposal he
provided to a New York literary agent, he described the
conspirators as follows:

An international cabal whose freelance services cover
parochial political intrigue, espionage, sophisticated
weapon technologies that include biotoxins, drug
trafficking, money laundering and rourder-for-hire has
emerged from an isolated desert Indian reservation just
north of Mexicali. ... I propose a series of articles
and a book, a true crime narrative, that unravels this
web of thugs and thieves who roam the earth with their
weapons and their murders, trading dope and dirty money
for the secrets of the temple.

At various times, the Octopus theory linked the INSLAW

»

atter, the alleged connection of the Cabazon Indian reservation

132

with international arms dealing, the assassination of "super gun"
inventor Gerald Bull, the suicide bombing of the U.S. Marine
barracks in Lebanon, the BCCI scandal, the Iran Contra affair,
the Iraqi arms procurement network, the collapse of the savings
and loan industry and other matters.

Mr. Casolaro apparently first learned about INSLAW's dispute
with the Justice Department in mid-1990 when Terry Miller, a
friend, told him about the dispute and encouraged him to talk to
the Hamiltons. By everyone's account, Mr. Casolaro became
obsessed with the INSLAW story and the web of conspiracy
allegations associated with it over the next few months. Mr.
Casolaro soon began to develop his Octopus theory whereby the
INSLAW affair was merely one arm of an octopus that had been
engaged in international intrigue since the early 1950s.

During the period from mid-1990 to his death, Mr. Casolaro
took hundreds of pages of notes during his telephone calls with
the Hamiltons and others. Mr. Casolaro' s close friend Ann Klenk
found his notes in the basement office of his house the day his
death was disclosed. Ms. Klenk provided the notes to Tara
Sonenshine, a producer for ABC's Night line program. Ms.
Sonenshine examined the notes and told Ms. Klenk that they did
not appear to contain any clues about Mr. Casolaro 's death.
Several other journalists looked at the notes and arrived at the
same conclusion. Ms. Klenk sent the notes to the Investigative
Reporters' and Editors' Association (IRE) at the University of
Missouri, where they were catalogued and archived. We obtained a

133

complete set of the notes from IRE. We also obtained copies of
certain pages that Ms. Klenk had kept.

We have carefully examined the notes, consisting of several
hundred pages. The notes are filled with names, places, phone
numbers, diagrams, and references to various international
intrigues, including arms dealing, drug trafficking, chemical
warfare, money laundering, terrorism and political
assassinations. Some of the notes appear to have been taken
during telephone conversations with various people, while other
notes appear to reflect information obtained from newspaper
articles and magazines. Finally, those notes indicate that Mr.
Casolaro spent a considerable amount of time receiving and
soliciting information from many of the same sources relied on by
INSLAW: Michael Riconosciuto, Charles Hayes, Robert Booth

Nichols, and others.

2. August 5-10. 1991

We spent a significant amount of time trying to reconstruct
the last week of Mr. Casolaro* s life in the hope that such a
reconstruction might lead to some answers about his death. The
following reconstruction is based on numerous interviews,
documentary evidence and police records. (Several of the
statements attributed to various witnesses are based on police
reports of interviews with those witnesses and do not reflect
separate questioning by us.)

Monday. August 5. 1991

On Monday, August 5, Mr. Casolaro saw his brother, Dr. Tony

134

Casolaro, during the day. Dr. Casolaro told us that he told his
brother that he looked tired. Later that day, Ann Klenk saw Mr.
Casolaro' s car parked outside a bar at a local shopping center.
According to Ms. Klenk, she went inside and saw Mr. Casolaro,
head slumped down, sitting at the bar. She said that Mr.

Casolaro "looked terrible." He told her in a tone that Ms. Klenk
described as disgust: "I just broke INSLAW. Bill Hamilton's

going to be real excited." Mr. Casolaro then told Ms. Klenk,

"You can have the story, and if you don't want it, you can give
it to Jack Anderson." (Ms. Klenk had once worked as a reporter
for syndicated columnist Jack Anderson) . Finally, Mr. casolaro
told Ms. Klenk he had "just gotten back" from West Virginia and
that he was going back again.

Ms. Klenk said she was worried about her friend. She
ordered a pizza for him, begged him to eat something and left.

Tuesday. August 6. 1991

On Tuesday, August 6, Mr. Casolaro again spoke to Ms. Klenk
and discussed a book proposal he had sent to his agent two weeks
earlier. Mr. Casolaro also had two phone calls that day with
John Elvin, a journalist friend in Annapolis. According to Mr.
Elvin, Mr. casolaro asked him during those two calls to review
the "stuff" he had sent him. Mr. Casolaro mentioned that he was
going to West Virginia and said he would call Mr. Elvin when he
returned .

Mr. Casolaro also called his friend Jim Pittaway that day
and told him that he was going to West Virginia to meet someone.

but that he did not know that person's identity.

During the day, he spent some time packing a suitcase.
According to Olga Mokros, Mr. Casolaro's neighbor and
housekeeper, Mr. Casolaro told her while she was helping him pack
that he would not be seeing his son again. Ms. Mokros also told
us that he took her into his basement office and showed her where
he kept his will.

That evening, Mr. Casolaro had dinner at the home of Larry
Stich, a former IBM attorney he had known for several years. Mr.
Stich told us that Mr. Casolaro did not seem depressed to him.

Mr. Stich recalls his friend telling him that evening that he was
going to meet with "somebody" regarding his book project.

After returning home, Mr. Casolaro called Robert Booth
Nichols at his home in Los Angeles, speaking to him from 1:40
a.m. until 2:46 a.m. EST. Mr. Booth Nichols told us that he
remembers Mr. Casolaro mentioning that he was planning a trip to
the Cabazon Indian Reservation in Southern California where he
would "wrap up" his research. According to Mr. Booth Nichols,

Mr. Casolaro sounded confident and not depressed.

Wednesday, August 7. 1991

On Wednesday, August 7, Ben Mason, a close friend, came over
to Mr. Casolaro's house to visit. Mr. Mason told us that Mr.
Casolaro was in an "exuberant" mood that day. Mr. Casolaro
showed Mason some papers in his basement office and told him that
the papers were in a specific order. Mr. Mason recalls seeing a
Photocopy of a passport photo of a young man named "Ibrahim."

136

While Mr. Mason was still there, Mr. Casolaro received a
call from Anne Weinfield and her husband. They were leaving
Washington to spend a few days at their beach house, and they
customarily called Mr. Casolaro to say goodbye whenever they left
town. Both Ms. Weinfield and her husband spoke with Mr.

Casolaro. They both recall that during the conversation Ms.
Weinfield told her husband that something was "definitely wrong"
with their friend. Ms. Weinfield told us that Mr. Casolaro
rambled incoherently and seemed to have lost touch with reality.

Mr. Casolaro also spoke with his cousin. Dr. Louis Petrillo,
a New York psychologist, that day. In a letter written ten days
later, Dr. Petrillo wrote that Mr. Casolaro sounded
"enthusiastic" on the phone, saying that he was "looking forward
to meeting with a 'source.'" Dr. Petrillo noted in that letter
that he had spoken frequently with his cousin during the months
before his death, and that, in his judgment, he had not
manifested "any symptoms or character traits . . . that could in
any way be associated with a potential for suicide." 42

That evening Mr. Casolaro and Ben Mason went out. Mr.
Casolaro met a woman while they were at a hotel bar. At 2:00
a.m., after taking Mr. Mason home, he returned to the hotel and

42 We spoke with Dr. Petrillo more recently. He recalled
the August 7, 1991 telephone call. With the benefit of
hindsight. Dr. Petrillo now believes that Mr. Casolaro could very
well have committed suicide. He stated that he was prepared to
change the conclusions expressed in his August 17, 1991 letter
based on what he now knew about the physical evidence and other
circumstances surrounding Mr. Casolaro* s death.

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called the woman he had just met from the lobby phone to see if
she would invite him to her room. She said no, and he returned
home.

Thursday. August 8. 1991

According to Mr. Mason, Mr. Casolaro called him at 6:00 a.m.
and told him of his failed attempt to rejoin the woman at the
hotel. Mr. Casolaro laughed off the incident and told his friend
he was going to West Virginia M to see the guys."

At about 10:00 a.m., Mr. Casolaro went to the office of his
insurance agent, J.J. Kelly, Jr. Mr. Casolaro paid the premium
for his homeowner's insurance to the Nationwide Mutual Fire
Insurance Company. While he was at his agent's office, he called
Danielle Stallings, his friend and real estate agent. Ms.
Stallings told us that Mr. Casolaro mentioned that he wanted her
to arrange a meeting for the following week with an acquaintance
of hers whose mother-in-law was knowledgeable about the
Philippines. As he was leaving Mr. Kelly's office, Mr. Casolaro
asked Mrs. Kelly for directions to Interstate 66 - West, a common
route from Northern Virginia to West Virginia.

Mr. Casolaro then drove to Martinsburg, West Virginia, and
checked into the Sheraton Inn. The desk clerk, James Lopez,
recalled that Mr. Casolaro checked in between 1:00 and 2:00 p.m.
He had a reservation and gave Mr. Lopez a credit card. Mr. Lopez
gave Mr. Casolaro one key to room 517. According to Mr. Lopez,
Mr. Casolaro told him that he was not going to open the room
right away because he was late for an appointment at the Stone

138

Crab Inn, a restaurant and bar not far from the Sheraton. Mr.
Lopez said he thought Mr. Casolaro had an old, "beat up"
briefcase with him, but he was not sure.

The bartender working at the Stone Crab Inn that day
reported that Mr. Casolaro arrived at about 12:30 p.m. 43 The
bartender who had previously worked at the Sheraton Inn,
recognized Mr. Casolaro from a prior visit he had apparently made
to Martinsburg about a year earlier. Mr. Casolaro told him that
he was going to be meeting with "some Arabs" at about 1:00 p.m.
According to the bartender, no one arrived. At about 1:20 p.m.
Mr. Casolaro asked the bartender for four quarters. He went
outside and returned a few minutes later. There are both
cigarette machines and a public phone outside the Stone Crab Inn.

Mr. Casolaro had a bottle of wine and a draft beer that
afternoon at the Stone Crab Inn. He spoke with another man at
the bar about a vineyard the man owned. Mr. Casolaro charged
twenty dollars worth of drinks on his Mastercard while at the
Stone Crab Inn that afternoon.

Mr. Casolaro left the Stone Crab Inn at about 3:30 p.m.,
telling the bartender he wanted to go back to his hotel to check
for messages and that he might be back later for the happy hour.
However, Mr. Casolaro apparently went directly to a Pizza Hut
restaurant located near the Sheraton. The waitress working

43 Although this is inconsistent with Mr. Lopez's
recollection that Mr. Casolaro checked into the hotel between
1:00 and 2:00, and went to the Stone Crab Inn, we find the
discrepancy insignificant.

139

there, a college student, positively identified him as having
arrived at about 3:30 p.m. She said that he ordered a pitcher of
beer and a small pizza. He drank the entire pitcher of beer but
ate only one or two pieces of the pizza and left the Pizza Hut at
about 4:00 p.m.

Hr. Casolaro was next seen at Heatherf ield' s lounge, located
inside the Sheraton Inn. At this point there is a significant
discrepancy in the recollections of two witnesses. The
bartender, who had served Hr. Casolaro on a prior visit to
Hartinsburg, recalled that he walked into the bar between 5:30
and 6:00 p.m. She recalled that Hr. Casolaro drank beer by
himself until about 6:30 p.m., when another hotel guest, the
occupant of room 519 from St. Paul, Hinnesota, sat down at the
bar and began talking to him. The bartender remembered that Hr.
Casolaro started drinking bottled beer, but later switched to
draft beer. Hr. Casolaro spoke with the hotel guest from
Hinnesota until about 11:30 p.m., when the bar closed. The
bartender does not recall seeing Hr. Casolaro talking with anyone
else that night.

However, the waitress at the Heatherf ield' s Lounge told a
different story. The police originally met her by chance, when
they went to the home of one of the Sheraton desk clerks to
interview him three days after Hr. Casolaro' s death. She
happened to be at the desk clerk's home. When the police showed
her Hr. Casolaro' s photograph, she said she remembered seeing him
in the bar but could not remember anything else. Later that day

( she contacted the police, saying she had now remembered that Mr.

Casolaro had arrived at the bar at about 5:10 p.m., and that he
sat at a table with another man whom she described as "dark
skinned, like maybe Iranian or Arabian." The waitress recalled
that both men were drinking draft beer, and that the "Iranian or
Arabian" man was drinking very fast and was very insistent that
he be served quickly. She claimed to have served four beers each
to Mr. Casolaro and the other man. She also said the other man
paid for all the beers in cash. Three days later, she helped the
police prepare a composite drawing of the "Iranian or Arabian"
person. On September 16, 1991, the police interviewed the
waitress again. She still stood by her story, but, according to
the police, her recollection seemed hazy and uncertain. No one
has been able to determine who the "Iranian or Arabian" person
was, if indeed there was such a person.

The waitress' recollection conflicts with the bartender's
recollection in several respects, the most important of which
are: (1) the bartender recalled Mr. Casolaro entering the bar

alone and initially sitting by himself while the waitress
recalled him sitting with an "Iranian or Arabian" man; (2) the
bartender recalled that he sat at the bar while the waitress
maintained that he sat at a table; (3) the bartender recalled
that he started drinking bottled beer while the waitress claimed
he only drank draft beer; and (4) the bartender claimed Mr.
Casolaro only spoke with one person, the guest from Minnesota,
the whole evening while the waitress claimed he spoke with the

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"Iranian or Arabian" man.

The bartender's recollection is corroborated by Mr.
Casolaro's bar tab, which shows that, beginning at 6:00 p.m. , Mr.
Casolaro purchased one bottled beer, then another bottled beer,
and then switched to draft beer. In all, he purchased seven
beers that evening. 44 The bartender's recollection is also
corroborated by the Minnesota guest's memory of the evening. He
recalled meeting Mr. Casolaro for the first time near the ice
machine down the hall from their fifth floor rooms sometime
between 5:00 and 6:00 p.m. A short while later, he went down to
the hotel bar, saw Casolaro drinking alone and joined him.
According to the hotel guest, they spent the rest of the evening
talking. Mr. Casolaro told him all about the Octopus project and
said he was waiting to meet "some Arabs." He recalled that Mr.
Casolaro acted agitated when the "Arabs" failed to show.

Given the fact that both the guest from Minnesota and the
credit card records are consistent with the bartender's
recollection, we are led to believe her recollection is likely to
be the more accurate. In any event, the Martinsburg police were
unable to locate any individual matching the description provided

44 Mr. Casolaro's family and friends insist that Mr.
Casolaro was neither an alcoholic nor a "heavy drinker".

However, Wendy Weaver, a close friend, told us that he drank to
excess two or three times per week. Furthermore, Ms. Weaver and
Lillian Pittaway told us that he seemed to be drinking more
heavily near the end of his life. Finally, an appointment book
provided to us by his neighbor included passages written by Mr.
casolaro reflecting a struggle with his alcohol use. For
example, in one passage, he wrote, "I wonder if the root of my
rinking is loneliness — for true companionship."

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to them by the waitress, and there is no evidence linking such an
individual with Mr. Casolaro's death.

Friday, August 9. 1991

The next day, Friday, August 9, 1991, Mr. Casolaro went to
the front desk at the Sheraton at about 12:00 p.m. and told the
desk clerk, Mr. Lopez, that he would be staying one more night.

At about 1:30 p.m., a hotel maid, Barbara Bettinger, spoke with
Mr. Casolaro outside his door. He asked whether the maids could
clean his room right then because he had work to do. Another
maid, Roxanne Willis, went inside the room and cleaned while he
waited outside. Ms. Willis noticed a bottle of wine on the lamp
table.

Mr. Casolaro was next seen at the Stone Crab Inn at about
2:30 p.m. He drank beer until about 5:30 p.m. According to the
bartender who was on duty at that time, Mr. Casolaro seemed
depressed and lonely and acted as if he wanted to talk to
someone. He bought five beers, one shrimp cocktail and one
crabcake sandwich with his credit card. The bartender who worked
the 6:00 p.m. to 1:00 a.m. shift at the Stone Crab Inn did not
see anyone matching Mr. Casolaro's description in the bar during
her shift that night.

After leaving the Stone Crab Inn, Mr. Casolaro placed a
collect call to his mother's house in Fairfax County at about
6:00 p.m. His family had planned a birthday party for his niece
that evening. He spoke with his mother and told her he would be
late for the party, if he made it at all.

143

At 7:00 p.m., a group of people from Pennsylvania, who had
traveled to Martinsburg for a soccer tournament that weekend,
checked into rooms 514, 515, 516 and 520. Mr. Casolaro was
staying in room 517. At about 9:00 p.m., one of the occupants of
room 515 saw someone matching Mr. Casolaro' s general description
enter room 517 with a key. She did not see the person's face, as
his back was to her. However, she recalled that he was carrying
a brown paper bag.

Shortly after midnight, Mr. casolaro walked to the Sheetz
Convenience Store across the parking lot from the Sheraton. He
asked for coffee, and the store clerk brewed a fresh pot for him.
She gave Mr. Casolaro a medium coffee and did not charge him
because he had to wait for the pot to brew. Both the store clerk
and another witness in the store at that time recalled that Mr.
Casolaro seemed relaxed and that he made small talk with them
both. When he left they saw him walk back toward the Sheraton.

The above account of Mr. Casolaro 's movements on Friday,
August 9 is not complete. We have not been able to pinpoint his
whereabouts between noon and 1:30 p.m. or between 6:00 and 9:00
p.m. 45

45 After learning of Mr. Casolaro 's death, William Turner,
one of Mr. Casolaro' s sources for the Octopus theory, claimed to
have met with him in the Sheraton parking lot on August 9. Mr.
Turner has been unclear as to the time of the meeting, placing it
anywhere between noon and 6:00 p.m. Mr. Turner has been
inconsistent with other important aspects of his story as well.
For example, shortly after Mr. Casolaro' s death, he told local
authorities that Mr. Casolaro had given him a "stack of documents
iighteen inches high." However, he told us that Mr. Casolaro had
iven him three sealed manila envelopes containing documents
2fore the August 9 meeting, and that he returned two of those

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Saturday, August 10. 1991

As described above, Mr. Casolaro's body was found at
approximately 1:00 p.m. Dr. Frost estimated the time of death as
between 7:00 and 8:00 a.m.

3 . Mr. Casolaro's State of Mind in August 1991

The most difficult aspect of any investigation involving the
possibility of a suicide is the effort to determine why a
particular individual might have taken his or her own life.
Nevertheless, we felt it to be part of our task at least to
address some of those issues. In our investigation, we found
numerous factors that might have caused Mr. Casolaro concern
and/or despair during the last year of his life. By identifying
those factors, we do not pretend to conclude that they
necessarily contributed to Mr. Casolaro's suicide. Rather, we
identify them in order to provide a complete picture of the
events leading up to his death.

envelopes to Mr. Casolaro during that meeting. He said he kept
the third packet in his safe. In any event, no one witnessed the
meeting in the hotel's parking lot.

We find Mr. Turner's statements lack credibility. First, as
indicated above, he has contradicted himself on several
occasions. Second, he has made inaccurate statements about his
background. Third, he has been convicted of a crime involving
false statements. On September 13, 1991, he pleaded guilty in
federal court to one felony count of making a false statement in
1988 to the Veteran's Administration. He was sentenced to 60
days in prison and five years probation. Then, on December 30,
1993, after Mr. Turner had moved to Tennessee and while he was
still on federal probation, the Bureau of Alcohol, Tobacco and
Firearms searched his home pursuant to a warrant. They found 23
firearms inside, including several with no serial numbers. As a
result, Mr. Turner was sentenced on June 30, 1994, to six months
for violation of his probation.

145

Financial Concerns

There is no question that, after spending over a year
developing his Octopus theory, Mr. Casolaro found himself in a
difficult financial condition and was greatly concerned as a
result. As discussed above, Mr. Casolaro' s home mortgage called
for a balloon payment of $178,790 on August 9, 1991. Although
the mortgage company extended the payment period for 30 days,
that entire amount was coming due on September 8, 1991. The
Martinsburg police investigation found that he had already
borrowed substantial amounts from his family earlier in the -year.

While he faced the balloon payment in a matter of weeks, Mr.
Casolaro' s income prospects appeared dim at the time of his
death. Since the summer of 1990, when he first began to pursue
the INSLAW story, he had repeatedly and unsuccessfully attempted
to secure a publisher for his story. Mr. Casolaro asked his
cousin, New York City psychologist and part-time author Dr. Louis
Petrillo, to help him find an agent. In September, 1990, Dr.
Petrillo arranged for him to meet a New York City literary agent.
The New York agent agreed to represent Mr. Casolaro in attempting
to negotiate a book deal.

On November 2, 1990, Mr. Casolaro sent a letter to the agent
enclosing copies of various songs and poems he had written. Mr.
Casolaro mentioned in the letter that he was now working on his
investigation "exclusively," but that he was also looking for a
paying job while waiting for an advance. Mr. Casolaro enclosed a
resume that significantly overstated his prior professional

146

accomplishments. He also enclosed a six-page treatment for the
book he was hoping to publish, which he entitled, "Behold, A Pale
Horse: A True Crime Narrative."

In the treatment, Mr. Casolaro wrote about the Cabazon
Indian reservation in Southern California and its alleged
connection to international arms dealing; the assassination of
"super gun" inventor Gerald Bull; and the suicide bombing of the
U.S. Marine barracks in Lebanon. On the last page of the
treatment, he proposed that "[t]he first three chapters of the
manuscript should be finished within three months of an initial
advance and each subsequent chapter will be delivered every
month. The completed book should be ready for publication by the
summer of 1991."

The New York City agent began searching for a more
experienced literary agent who could put together a combined book
and television deal for his client. He also asked Mr. Casolaro
to sign a one-year "exclusive" representation agreement, under
which the agent would receive a 20% gross commission, plus an
additional 10% gross commission to any third parties, for any
sales of '"Behold, A Pale Horse,' including without limitation
phonograph recordings, video, television, motion pictures, radio,
music publishing, songwriting, live performances, books,
merchandising, lecture(s), seminar (s) . . . ." The agreement was
signed on March 14, 1991.

On December 10, 1990, Mr. Casolaro *s New York City agent
contacted Creative Artists' Agency (CAA) , a major Hollywood

147

talent agency, to see whether they would be interested in meeting
Mr. Casolaro. Six days later, CAA agent Melanie Ray flew to New
York and met with Dr. Petrillo, Mr. Casolaro and his New York
City agent for brunch. Mr. Casolaro had two drinks before Ms.

Ray arrived and apparently did not make a good impression on her.
During the meeting, Mr. Casolaro said the Octopus project was his
"shot at a. piece of investigative journalism to put me on the
map," and that he wanted to do something "to make my son proud of
me." 46 Ms. Ray said that CAA was not interested, but she offered
to help him find another literary agent.

Several days later Ms. Ray wrote to the New York City agent,
indicating that she had found another literary agent, Elizabeth
Mackey, who was willing to read the "Pale Horse" treatment. In
her letter Ms. Ray also referred to Casolaro* s behavior at the
New York brunch in unflattering terms: "To expect 'cloak-and-

dagger* and to get slapstick was quite scintillating."

During the next six months, according to Ms. Ray's records,
Mr. Casolaro and his New York City agent contacted both Ms. Ray
and Ms. Mackey dozens of times to check the status of efforts to
find a publisher and obtain an advance for Mr. Casolaro.

on April 20, 1991, after returning from a trip to see Mr.

46 This was not the first major investigative effort
undertaken by Mr. Casolaro. In the mid 1970s, he spent
considerable time pursuing an "alternative" theory on the
Watergate break-in in which the break-in was actually engineered
by intelligence operatives loyal to the Democratic Party.
According to this theory, the Democrats knew they would lose the
1972 election, so they engineered the break-in to look like a
•epublican operation, thus sowing the seeds for President Nixon's
ventual downfall.

148

Riconosciuto in Washington, Mr. Casolaro wrote a letter to the
New York City agent. He enclosed another treatment, this time
entitled "Update on the Pursuit of the Tape and the Jailing of
Danger Man." In this treatment, Mr. Casolaro described his trip
to Washington state and how he had spent hours unsuccessfully
searching for a tape that Mr. Riconosciuto claimed contained
threats by Mr. Videnieks directed at him. In his cover letter,
Mr. Casolaro wrote:

I must explain how much deeper in debt I am. Every month
that goes by without income puts another $4,500 or so on my
liability just keeping my family and self alive. On top of
that, my mortgage which is now up to $300,000 is scheduled
for final payment in September 1991.

On May 31, 1991, Ms. Mackey called Ms. Ray and told her that
she had decided not to represent Mr. Casolaro. Ms. Ray notified
the New York City agent of Ms. Mackey's decision. Several days
later, Ms. Mackey telephoned Ms. Ray to see whether Ms. Ray could
ask Mr. Casolaro* s New York City agent to "keep Casolaro from
calling her and pleading his case for representation now that she
has turned him down." On June 6, 1991, Ms. Mackey wrote a letter
to Mr. Casolaro, informing him that her agency would not
represent him. Mr. Casolaro contacted Ms. Mackey again in July,
and on July 31, 1991, Ms. Mackey sent another letter rejecting
him yet again.

In addition to the efforts to find a publisher through Ms.
Ray and Ms. Mackey, Mr. Casolaro and his New York City agent also
contacted Time Warner and its subsidiary. Little, Brown & Co. On
December 17, 1990, Mr. Casolaro, his agent and Dr. Petrillo met

149

with Kelso Sutton of Time Warner and Roger Donald of Little,
Brown. Mr. Donald looked at Mr. Casolaro' s materials, and
rejected it. However, he suggested that Time Warner's magazine
division might be interested, but that Mr. Casolaro would have to
work with a Time Magazine staff writer to develop the story. Mr.
Casolaro refused. He said that he wanted to do the project as a
book, and he wanted to do it by himself.

Mr. Casolaro called Mr. Donald again approximately three
weeks before his death and asked him to review some "new
material." Mr. Casolaro faxed the material to Mr. Donald, who
reviewed it. Mr. Casolaro contacted Mr. Donald again several
days before his death, and Mr. Donald again told him that Time
Warner and Little, Brown were not interested in publishing Mr.
Casolaro* s "Octopus" project or in paying him an advance.

On July 22, 1991, Mr. Casolaro faxed to his New York City
agent his final treatment. The three and one-half page treatment
is entitled "The Octopus." He attached to the treatment a two
page list of 51 individuals and groups comprising a "Cast of
Characters." The treatment surveys various scandals and other
international events of the late 20th century. In the cover
letter, Mr. Casolaro wrote:

I have purposefully left out some names in the CAST OF
CHARACTERS for two separate reasons. I will tell you
those names and the reasons when we talk.

This is my final week for these marathon hours over the
last 12 months. Encountering this odyssey, meeting it
with my whole life, is to grapple with something
personal since I've risked everything. By Friday, I
have to come up with about $5000 just to cover my
mortgage payment and my real estate taxes and in

150

September I'll be looking into the face of an oncoming
train. Father, what will I do?

Still, I feel the happiness that an eskimo must feel
when he comes across fresh bear tracks when he*s ahead
of all the other sledges. It's just the way it
has happened.

It appears that Mr. Casolaro never had any chance of finding
a publisher for his work. Mr. Donald, for example, told the
Martinsburg police, when they contacted him after Mr. Casolaro's
death, that Mr. Casolaro's work was "amateur" and that it
reflected simply a rehash of material commonly available in
newspaper and magazine articles. Ms. Ray and Ms. Mackey likewise
were unimpressed with his work. 47

Dr. Tony Casolaro told us that his brother would never have
committed suicide over money. He explained that their family was
very close and his brother always knew that he could turn to his
family for financial resources.

The Onset of Multiple Sclerosis

As discussed above, the autopsy revealed that Mr. Casolaro
had been suffering from multiple sclerosis at the time of his
death. We are unaware of any direct evidence that the disease
was diagnosed before his death. Our investigation found that the
last time he had been to a doctor was 18 months before his death

47 Mr. Casolaro's frustration in finding a publisher for his
Octopus story was the last in a series of financial setbacks.

Mr. Casolaro had enjoyed great professional success with a
computer newsletter he owned called Computer Age . However, he
was forced to sell the publication in 1990 after he began to
experience some financial difficulties. Though he thought he
would continue to work for the new owner, he was fired following
the sale.

151

when he needed emergency treatment after accidentally dropping a
barbell on his head.

However, there are some indications that the disease was
beginning to affect his life and that he was concerned that he
had some sort of illness. For example, during June and July
1991, some of Mr. Casolaro's friends noticed that he seemed to be
having certain physical problems. Ann Klenk noted that Mr.
Casolaro experienced some sort of motor difficulty with his right
hand and had trouble opening a window in her house. On another
occasion Mr. Casolaro, who was in apparently good physical shape,
had trouble finishing a friendly volleyball game. On another
occasion, he was too exhausted to help his friend Bill Webster
paint his house. Mr. Casolaro also complained on separate
occasions to both Wendy Weaver and Ann Klenk about vision
trouble. He began borrowing Wendy Weaver's eyeglasses for
reading and reduced his night driving. Ms. Weaver observed that
Mr. Casolaro also seemed to have weakness in his limbs, and that
he could not perform various simple tasks around the house.

Also, several weeks before his death, he confided to his
friend Ann Klenk that he was "having trouble thinking."

According to Ms. Klenk, he said that "if I ever couldn't think
I'd kill myself."

Finally, Mr. Casolaro approached Anne Weinfield, a long-time
friend and nurse, several months before he died and asked her
about "research" he was doing about "slow acting viruses,"
including multiple sclerosis. Ms. Weinfield recalls that he

152

specifically asked her about the symptoms and consequences of
multiple sclerosis.

Other Indications

There were some other indications that are, at the very
least, consistent with a state of mind contemplating suicide.

For example, several days before his death, Mr. Casolaro showed
Zoe Gabriel le Milroy, a friend, a letter that he had written to
his son in which he imparted what Ms. Milroy described as ’'heavy”
fatherly advice. Ms. Milroy told us that she immediately asked
Mr. Casolaro if the letter was actually a suicide note. She said
he changed the subject.

Four days before his death, Mr. Casolaro 's neighbor, Olga
Mokros, came to his house. She worked as a housekeeper for Mr.
Casolaro. Ms. Mokros helped Mr. Casolaro pack a suitcase as he
told her he was going on a trip. She asked if she should prepare
the house for his son, who was expected on a visit from Colorado
in two weeks. According to Ms. Mokros, Mr. Casolaro told her
that he "would not see [his son]" anymore. He then took her into
his basement office and showed her where he kept his will.

* There were other indications of strange and perhaps suicidal
behavior as well. For example, in approximately May 1991, Mr.
Casolaro was housesitting for his friend Bill Webster. According
to Ms. Klenk, Mr. Casolaro called her at 5:00 a.m. one morning
and told her he had hurt himself. He said he had "spent the
night on the roof" of the house and that he had fallen off and
hurt his leg. Several days later, however, Mr. Webster called

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Ms. Klenk and told her he had found a broken ceramic object and
some bloody towels in his basement. During the autopsy. Dr.

Frost found a healed scar on the inside of Mr. Casolaro's right
leg near the femoral canal and vein.

Ms. Klenk also told us that, in approximately October 1990,
Mr. Casolaro had a mysterious auto accident in which his car went
off the side of the highway. Mr. Casolaro told Ms. Klenk and
Wendy Weaver that he thought he had been forced off the road, but
he did not want to report the incident to the police or to seek
medical treatment. We were unable to learn enough about this
incident to determine whether it was a legitimate accident, a
staged suicide attempt or a homicide attempt.

Some of his friends also noticed that he had become
"obsessed” and "all consumed" with the "Octopus" story by early
1991. Two of Mr. Casolaro's closest friends, Wendy Weaver and
Ann Klenk, both report that he was completely immersed in the
story. They both told us that Mr. Casolaro slept and ate very
little during the final months of his life. Jim Pittaway, who
had known Mr. Casolaro for several years, told us that beginning
in February, 1991 Mr. Casolaro slipped into a "fantasy land" of
conspiracy and intrigue. Other friends say that Mr. Casolaro was
"losing his grip" on reality.

Dr. Petrillo and Ann Kldnk both told us that Mr. Casolaro
was absorbing huge amounts of information, so much that he was
having trouble organizing it in his mind. Mr. Casolaro told Ms.
Klenk that he was becoming frustrated at his inability to

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organize his thoughts and reduce his ideas to writing. Wendy
Weaver and Ann Klenk report that he was "disappointed" and "hurt"
at his failure to secure a publisher or obtain an advance. Ann
Klenk, herself a professional journalist, suggested to Mr.
Casolaro that he try to break the project into smaller, more
manageable bits and to try publishing it piecemeal, perhaps as a
series of newspaper or magazine articles rather than as a book.

Not all of Mr. Casolaro ’s friends, however, considered him
to have been depressed or emotionally upset. Ben Mason and Wendy
Weaver, for example, report that he appeared enthusiastic about
the "Octopus" project and insist that he continued to be
generally upbeat and happy.

Psychological Autopsy

Finally, at our request, the FBI’s National Center for the
Analysis of Violent Crime, located at the FBI Academy in
Quantico, Virginia, conducted an equivocal death analysis, or
"psychological autopsy," of Mr. Casolaro. Three FBI behavioral
scientists prepared a report examining Mr. Casolaro 's life
history and his behavior during the final weeks and months of his
life. They also reviewed the autopsy report. They concluded
that Mr. Casolaro had committed suicide and that he may have
intentionally "scripted" the end to his own life.

The behavioral scientists noted that the "one common
denominator in the life of Mr. Casolaro up until 1990 appeared to
be feelings of high expectations of success, followed by
disappointments." They found that while Mr. Casolaro "wore the

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facade of the eternal optimist . . . deep down inside he may have
perceived himself as a failure as an author, an investigative
reporter, a husband, a father and as a businessman.*' The
behavioral scientists found his physical problems and possible
concern about multiple sclerosis very significant, noting that
"the thought of having a progressively debilitating disease may
have been overwhelming."

Added to the other "stressors" in Mr. Casolaro's life, he
may have believed that his situation was deteriorating and that
"he was running out of time." The report noted that by "planting
the seeds" in the minds of those close to him that he may have
been killed, Mr. Casolaro thought he might be alleviating the
guilt feelings his family and friends would feel for not
preventing his suicide. In addition, Mr. Casolaro might have
hoped that by making his death look mysterious, he might gain in
death the journalistic fame he had never enjoyed in life, by
"dying for a story," becoming "a martyr for truth and justice,"
only to have been "silenced on the eve of his greatest triumph by
the forces of evil." 4 *

4 * Most forensic scientists regard the psychological autopsy
tool as a valuable aid in understanding the mental state leading
to an individual's decision to commit suicide. However, the
courtroom evidentiary value of psychological autopsies has
recently been criticized in a recent law review article. Ogloff
and Otto, Psychological Autopsy; Clinical and Legal Perspectives .
37 St. Louis U.L.J. 607 (1993) (attacking reliability of
psychological autopsies) .

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4. Allegations Concerning Mr- Casolaro's Death

There is no credible evidence that Mr. Casolaro's death was
anything other than a suicide. Nor is there any evidence placing
any other individual in Mr. Casolaro's hotel room on either the
evening of August 9 or the morning of August 10, 1991.
Furthermore, the evidence is wholly consistent with suicide.
Nevertheless, several individuals have speculated that some sort
of foul play was involved in Mr. Casolaro's death. In this
section, we review those allegations.

Ethvl Alcohol Injection

INSLAW recently asserted that perhaps someone entered Mr.
Casolaro's room and injected him above the spine with "ethyl
alcohol absolute," thereby deadening his nerves. Dr. Cash, the
West Virginia toxicologist, found no ethyl alcohol in Mr.
Casolaro's blood. Moreover, Dr. Frost found no injection sites
anywhere on his body. Pure ethyl alcohol would have been
particularly irritating to the skin, but no such irritations were
found during the autopsy.

We asked Dr. Yale Caplan, a Baltimore toxicologist and
former President of the American Academy of Forensic Sciences,
about the "ethyl alcohol absolute" theory. He agreed with Dr.
Frost that it would have been impossible for Mr. Casolaro to have
received such an injection without Dr. Frost seeing evidence of
it during the autopsy. Dr. Caplan also noted that such an
injection would have to have been precisely and expertly made,
with Casolaro's cooperation, for it to have achieved a "nerve-

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deadening" effect.

Involvement of Mr. Riconsciuto

On September 30, 1991, Robert Booth Nichols, one of Mr.
Casolaro's primary sources, told Detective Sergeant Swartwood of
the Martinsburg Police Department that he thought Mr. Casolaro
had been murdered and that Michael Riconosciuto was probably
involved in some way. He did not and has not provided any basis
for those allegations other than his claims that Mr. Casolaro was
investigating some dangerous individuals.

We are unaware of any evidence linking Mr. Riconosciuto to
Mr. Casolaro's death. Further, Mr. Riconosciuto was in prison in
Tacoma, Washington, awaiting trial on methamphetamine charges, on
the day Mr. Casolaro's body was discovered.

Involvement of Robert Booth Nichols

Robert Booth Nichols, a self-styled "international
businessman," was one of Mr. Casolaro's primary sources.

Telephone records from the last few months of Mr. Casolaro's life
indicate that the two men spoke regularly and at length during
that time period. 49

According to several of Mr. Casolaro's friends, he spoke
often of Mr. Booth Nichols and described him as a mysterious
figure with connections to Japanese organized crime, the

49 Mr. Booth Nichols and Mr. Casolaro also met at least once
during the early summer of 1991. The two men had dinner at a
restaurant in Virginia. The following day, Mr. Casolaro
introduced him to his friend Wendy Weaver. Contrary to some
published reports, Ms. Weaver told us that Mr. Booth Nichols did
not punch, grab or beat up anyone in a bar while she was with him
md that he did not boast of connections with organized crime.

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intelligence community and international arms dealers. Mr.
Casolaro told several friends that he had heard from other
sources that Mr. Booth Nichols was dangerous and that he had been
involved in several murders.

An article in the January 1993 issue of Spy magazine
suggests that Mr. Booth Nichols may have had Mr. Gasolaro killed
because he feared Mr. Casolaro was about to expose him as
someone who had years earlier offered to become an FBI informant
against the mafia. We found no evidence that he had anything to
do with Mr. Casolaro' s death. Furthermore, he was in London on
the day that Mr. Casolaro died. 50

Involvement of Peter Videnleks

Mr. Riconosciuto and others have suggested that Peter
Videnieks, the Department of Justice contracting officer on the
PROMIS contract, was also somehow involved in Mr. Casolaro 1 s
death. There is no evidence whatsoever of Mr. Videnieks'
involvement. The allegations appear to rest on the fact that Mr.
Videnieks' wife works for Senator Robert Byrd of West Virginia,

50 Though Mr. Booth Nichols conveyed an image of intrigue to
Mr. Casolaro, it is clear that at least some of that image was
exaggerated. For example, in a lawsuit against the Los Angeles
Police Department, he testified that he had been a member of the
United States intelligence community for many years. ( Booth
Nichols v. City of Los Angeles . No. NCC 31322B, Trial Transcript,
Mar. 11, 1993, 32 et sea . ) No evidence supports that claim. In
fact, the CIA informed us that it does not have, nor has it ever
had, any employment relationship, contractual relationship or any
other association with Mr. Booth Nichols. Mr. Booth Nichols also
testified that he had once "been instructed" to make a bid to
purchase the assets of the Summa Corporation in the late 1970s,
following Howard Hughes' death. f id. 141-51). The documents
connected to that incident, however, reflect that Summa summarily
rejected Booth Nichols* overtures.

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the state in which Mr. Casolaro's death occurred, and that Mr.
Videnieks was a friend of Joseph Cuellar.

In addition, Charles Hayes, the Kentucky salvage dealer,
told Martinsburg police that Peter Videnieks and Dr. Earl Brian
had gone to the Sheraton Inn in Martinsburg around the time of
Mr. Casolaro's death to play in a "high-stakes poker game,
requiring $10,000 minimum to sit at the table." The police found
it difficult to believe that gaming of that magnitude could have
been going on in Martinsburg without their knowledge.
Nevertheless, they investigated this lead but were unable to
corroborate it. As discussed above, we believe Mr. Hayes lacks
credibility.

During an interview with us, Mr. videnieks denied having any
involvement in Mr. Casolaro's death and claimed that he was with
his wife at their summer cottage in Treadwell, New York, from
August 5 to August 11, 1991. His personnel records reflect that
he was on leave during this time period, and a credit card
receipt shows that he made a purchase at a bookstore in Oneonta,
New York on August 9, 1991. His telephone records indicate that
a call was placed to his brother from the Treadwell cottage on
August 9, 1991 at 8:35 p.m.

We have no reason to question Mr. Videnieks* claim that he
was in New York on August 10, 1991 and are unaware of any
evidence linking Mr. Videnieks to Mr. Casolaro's death.

Involvement of Joseph Cuellar

Army Reserve Major Joseph Cuellar also was in contact with

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Hr. Casolaro during the last few months of his life. Hr.

Casolaro apparently met Hr. Cuellar by chance one afternoon in
Hay 1991 at "The Sign of the Whale" bar in Arlington, Virginia.
Hr. Cuellar had gone to the bar expecting to meet some friends
who were going to celebrate his return from Operation Desert
Storm. Hr. Casolaro, who was already seated at the bar waiting
for his friend Lynn Knowles when Hr. Cuellar arrived, struck up a
conversation with Hr. Cuellar. Hr. Cuellar talked of his
exploits in the Army special forces, and, according to Hr.
Cueller, Hr. Casolaro became fascinated. After Hs. Knowles
arrived, she listened as the two men discussed various military
issues. When Hr. Cuellar's friends arrived, they made
arrangements to meet again.

The two men talked on the phone several times after they
first met. They also saw each other at least two additional
times. In addition. Hr. Cuellar started dating Hs. Knowles.

During one of their conversations, Hr. Casolaro apparently
asked about various individuals involved in his "Octopus" story.
Hr. Cuellar told him he knew Peter Videnieks. According to Hr.
Cuellar, he explained that he knew Hr. videnieks because his
former fiance had worked with Hr. Videnieks' wife in the Capitol
Hill office of West Virginia Senator Robert Byrd. Both Hr.
Cuellar and Hr. Videnieks told us that their relationship was
social, that they had double-dated with their significant others
a number of times, and that they saw less of each other after Hr.
Cuellar broke up with his fiance.

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Once he learned of Mr. Cuellar's relationship with Mr.
Videnieks, Mr. Casolaro asked Mr. Cuellar repeatedly to arrange a
meeting with Mr. Videnieks. Mr. Casolaro wanted to interview Mr.
Videnieks about the allegations made by Mr. Riconosciuto in his
March 1991 affidavit that Mr. Videnieks had threatened him. Mr.
Cue Her called Mr. videnieks to try to arrange a meeting, but Mr.
Videnieks refused. 51

After Mr. Casolaro died, Mr. Cuellar stopped dating Ms.
Knowles. She told us that at one point, as their relationship
was deteriorating, he made a veiled threat to her, stating that
she was asking too many questions about Mr. Casolaro, that she
had two children, and that she would not be doing them a favor if
she were to wind up like Mr. Casolaro or another journalist who
had been killed in Guatemala. Mr. Cuellar denied making those
statements to her.

Several people have suggested that Mr. Cuellar was somehow
involved in Mr. Casolaro* s death. We found no evidence
supporting that hypothesis. On the day Mr. Casolaro died, August
10, 1991, Cuellar was in Washington, D.C., working on his
"outprocessing" from Desert Storm, and his "in-processing" into
the Southern Command. Several witnesses have verified that he
was in Washington on August 10, 1991.

51 According to Mr. Cuellar, Mr. Casolaro confided in him
near the end of his life, expressing frustration that he had
become so wrapped up in the "Octopus" story that he had lost his
perspective and was unable to arrange the material into a
cohesive story. Mr. Casolaro also told him that he was in
financial distress and that he was close to losing his house.

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Threats Directed at Mr. Casolaro

During the last few weeks of his life, Mr. Casolaro told
several of his friends that he had been receiving death threats
over the telephone, in addition, Mr. Casolaro* s neighbor, Olga
Mokros, told us that she was in Mr. Casolaro' s house on the
Monday before he died, that she answered the phone, and that the
caller uttered a death threat. She could not recall any other
specific occasions on which Mr. Casolaro received such a call,
even though she was at his house nearly every day. Mr. Casolaro
also told several people that the story he was working on was
"dangerous" and that he had sent his younger brother John away
from the house because of the danger. According to Dr. Tony
Casolaro, his brother once told him, "If I die, don't believe it
was an accident."

However, several of Mr. Casolaro 's closest friends told us
they now believe, with the benefit of hindsight, that he invented
at least some of the threatening phone calls and the other
"dangers" involved in his work so that people would believe,
after he committed suicide, that he might have been murdered.

Jim Pittaway told us that he thinks Mr. Casolaro committed
suicide and that he "shrouded his death in mystery" so that his
conspiracy theories would outlive him. He told us that when he
suggested to Mr. Casolaro that he contact the phone company after
he had allegedly received threatening calls, Mr. Casolaro quickly
changed the subject. Lillian Pittaway, Jim Pittaway's wife,
described Mr. Casolaro as self -destructive. Zoe Gabrielle

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Milroy, a close friend of Mr. Casolaro's for fourteen years,
believes that he "perpetrated this conspiracy theory" to make his
death seem mysterious and to ease the pain his family would
suffer from an outright suicide. 52 Pete Kennedy, a guitarist and
friend, shares Ms. Milroy' s view that Mr. Casolaro wanted
everyone to think he was in danger so that his death would appear
mysterious. Ms. Milroy also discounts the views of those who say
Mr. Casolaro was not depressed, noting that he was a "consummate
actor" who could be "laughing on the outside, but very hurting on
the inside."

"Village Voice" Phone Call

On Sunday night, August 11, 1991, the day before news of
Casolaro's death became public, a writer at the Village Voice in
New York City named Dan Bishoff received a telephone call. Mr.
Bishoff later told the Martinsburg police that he was in his
office that evening when the phone rang on a direct dial line.

The caller told him, "There has been a death of a journalist in
West Virginia that needs to be looked into." Mr. Bishoff told
the police that the caller may have mentioned the name
"Casserole. "

We spoke with Mr. Bishoff. Although he continues to assert
that he received a telephone call on August 11, he said that,
upon reflection, he is not sure whether the caller mentioned the

52 Sadly, Mr. Casolaro was not the first person to commit
suicide in his family. In 1971, his younger sister took her own
life by overdosing on drugs. She was 18 years old and living in
the Haight- Ashbury district of San Francisco at the time.

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name "Casserole" or anything else approximating Casolaro. He
told us that many "conspiracy buffs" had his inside telephone
line, and he frequently received calls about dead journalists.

He indicated that at the time he spoke with the Martinsburg
police, he "wanted it to be true" that Mr. Casolaro had been
murdered, but that now he believes he committed suicide. He told
us that he now regards the Sunday night telephone call as "not
significant. "

Casolaro* s Fear of Needles and Blood

Some of Mr. Casolaro' s family and friends suggest that he
would not have committed suicide by cutting his wrists because he
was frightened of needles and the sight of blood. We spoke with
several doctors and dentists who treated Mr. Casolaro during the
years before his death. Dr. Tony Casolaro* s medical partner. Dr.
Steven Zimmet, told us that during a routine physical examination
approximately two years before Casolaro died, Casolaro put up a
fuss before submitting to a blood test. However, Dr. Stanley
Levin, who performed a root canal on Casolaro in December 1990,
told us that Mr. Casolaro exhibited no fear of needles, blood,
pain, or any of the other incidents of oral surgery.

Casolaro *s Planned Meeting In West Virginia

Mr. Casolaro told many of his friends and family that he was
going to West Virginia to meet a "source." No one with whom we
spoke recalls Mr. Casolaro ever identifying who it was he
supposedly planned to meet. Mr. Casolaro himself gave varying
descriptions of the "source," telling the Weinfields that he did

165

not know the identity of the person he was going to meet; telling
Lillian Pittaway that he was going to meet someone who would give
him his "biggest tip;" and telling Ben Mason that he was going to
see "the guys."

As discussed in some detail above, we were able to account
for most of Mr. Casolaro 's time in West Virginia. We were unable
to find any conclusive evidence that he met with anyone while in
Martinsburg other than his chance meetings with various
individuals at bars and restaurants. However, as noted above, a
waitress at the Sheraton’s Heather field Lounge said she saw Mr.
casolaro meeting with either an "Iranian or Arabian" individual
on Thursday, August 8. Also, William Turner claims to have met
with Mr. Casolaro on the afternoon of August 9.

For the reasons indicated above, we are not convinced that
either of these meetings took place. However, regardless whether
these meetings took place, there is no evidence linking any of
the alleged participants in the meetings to Mr. Casolaro' s death.

The Paper in Casolaro' s Shoe

During forensic testing, the West Virginia State Police
Crime Laboratory found a folded piece of paper inside Mr.
Casolaro' s left shoe. The shoe had been found in room 517, next
to the bed. The paper had indentations, as if someone had
written something on a page on top of the paper. The laboratory
determined that the paper had come from the same legal pad on
which Mr. Casolaro had written the suicide note. The laboratory
was able to reproduce the impressions left on the paper. The

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writing was Mr. Casolaro's; and the paper read as follows:

o u tlin e

Chapter on 1980.

Terrorist underground. Afghanistan. Mideast. Iran.

John Philip Nichols after arrival

Indian Reservation

Fred Alvarez

Paul Morasca

Philip Arthur Dempson

Fresno

Hercules — Bill Kilpatrick The Big Tex — Ricono
San Francisco

Finish up chapter w/ Paul M. & Fred A. / ord
There is no indication when Casolaro had written those
words, or why he had put the piece of paper inside his shoe.

Lack of Documents

Several of Mr. Casolaro's friends and family members told us
that Mr. Casolaro typically carried a significant number of notes
and documents with him. The fact that no documents were found in
Mr. Casolaro's hotel room following his death, they suggest, may
indicate that he was killed and his notes taken.

There is no credible evidence that Mr. Casolaro ever had any
documents with him while he was in Martinsburg. All the hotel
employees, including the maids that cleaned his room, told the
police that they never saw any documents either in Mr. casolaro's
room or in his immediate possession. Nor was he seen with any
documents at any other location in Martinsburg. In short, there
is no credible evidence that there were ever any documents
reflecting his investigation in his hotel room.

Mr. Lopez, the desk clerk, said he may have seen Mr.

Casolaro with a briefcase but he is not sure. In light of his

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lack of certainty and the fact that none of the other hotel
employees recall seeing a briefcase or documents, we believe that
Mr. Lopez was probably mistaken. 53

F. Conclusion

The overwhelming physical evidence points to the conclusion
that Mr. Casolaro committed suicide: the crime scene, the

autopsy, the blood spatter report and the toxicology report as
well as the other aspects of the investigation undertaken by the
Martinsburg police and us. Furthermore, there were indications
during the last few months of Mr. Casolaro* s life that he was
despondent and exhausted. Although there were mistakes made
during the original investigation into the death (most
particularly the failure to seal the room and the early embalming
of the body) , we have no reason to believe that the original
investigations were not thorough or undertaken in anything other
than the utmost good faith. Based on our review of all the
evidence, we concur with the conclusion reached by Martinsburg
police authorities that Mr. Casolaro took his own life.

We reached that conclusion after carefully considering the
questions and concerns raised by his family and friends as well
as by others. After reviewing them, we believe that many of
those questions are typical of the types of questions that follow
any suicide. As for the allegations of foul play raised by some

53 William Turner claims to have given Mr. Casolaro some
documents on Friday, August 9, 1991. As discussed above, we find
his story to be wholly unreliable.

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individuals, there is simply no evidence supporting the
involvement of any of the individuals identified in Mr.

Casolaro's death.

VI. The Attorney General Should Not Appoint an Independent

Prosecutor to Further Investigate INSLAW's Charges.

In its 1992 report, the House Judiciary Committee
recommended that the Attorney General appoint an independent
counsel to investigate, among other things, "INSLAW's allegations
of a high level conspiracy within the Department to steal
Enhanced PROMIS software to benefit friends and associates of
former Attorney General Meese." (House Report 113.) Since that
time, the independent counsel law has expired and subsequently
been renewed. We strongly recommend, based on all of the
conclusions reflected in this report, that an independent counsel
not be appointed to investigate any claims related to the INSLAW
affair.

First, INSLAW's allegations have been fully and fairly
investigated by a special counsel and have been found to be
totally lacking in credibility. There is no reason to question
the integrity or independence of Judge Bua or his investigation.
To the contrary. Judge Bua's integrity is above reproach, and our
review of his investigation confirmed the thoroughness and
independence of his efforts in this endeavor. An independent
prosecutor would simply duplicate that effort. Accordingly, the

169

appointment of an independent prosecutor would, in our opinion,
constitute a waste of government funds and an unwise use of the
talents and energies of whatever respected lawyer was so
appointed.

Second, the Department of Justice has already conducted a
review of the allegations made by INSLAW and determined that they
were not sufficient to warrant the initiation of a preliminary
investigation under the Independent Counsel statute. In February
1988, INSLAW submitted a series of allegations to the Public
Integrity Section of the Department of Justice which it
maintained justified the appointment of an independent counsel.
Those allegations included, among others, the charges that former
Attorney General Edwin Meese and Judge Jensen conspired to steal
INSLAW's software; that the conspiracy was intended to benefit
Hadron and Dr. Brian; that the Department interfered with
INSLAW's legal representation by inducing Dickstein, Shapiro &
Morin to ask INSLAW's attorney to withdraw from the firm; that
the Department sought to seek a conversion of INSLAW's bankruptcy
to a liquidation proceeding; and that the Department instigated
or encouraged a hostile take-over bid of INSLAW by Systems and
Computer Technology, Inc., in order to obstruct INSLAW's suit
against the Department. In May 1988, the Department informed
INSLAW that the allegations were insufficient to warrant a
preliminary investigation under 28 U.S.C. § 591 and that the
matter was accordingly closed. The determination was made after
careful consideration by the Department of the credibility of the

170

source of the allegations and the specificity of those
allegations as required by the Independent Counsel statute. 54

Third, there are no "covered" officials for whom the
appointment of an independent counsel would be appropriate at
this time. The Independent Counsel Reauthorization Act of 1994
limits the applicability of the law to one year after the covered
government official leaves office. All the potential targets of
such an investigation have been out of office for more than one
year. Accordingly, there are no covered officials that would
require triggering the provisions of the Independent Counsel law.

And fourth, the discretionary appointment of an independent
counsel for officials not considered to be "covered" officials
requires a determination that an investigation of such an
official by the Department would result in a "personal, financial
or political" conflict of interest. There is no indication that
such a conflict exists or would exist if the Department were to
bring charges against any of the individuals identified by INSLAW
as allegedly being involved in a conspiracy to hurt INSLAW.

54 INSLAW subsequently submitted a request to the Division
for the Purpose of Appointing Independent Counsels of the U.S.
Court of Appeals for the District of Columbia Circuit to appoint
an independent counsel. The request was rejected on
jurisdictional grounds. In re INSLAW. Inc. . 885 F. 2d 880 (D.C.
Cir. 1989). INSLAW's petition for a writ of mandamus directing
the Attorney General to conduct a criminal investigation based on
INSLAW's various allegations also was rejected by the courts.
INSLAW. Inc, v. Thornburgh . 753 F. Supp. 1 (D.D.C. 1990).

171

VII. The Department of Justice Should Not Authorize The Payment

Of Any Additional Compensation To INSLAW.

At the heart of the controversy between INSLAW and the
Department of Justice is a dispute over money. The basic dispute
centers on (1) whether INSLAW has any proprietary rights in the
PROMIS software that it used to perform its obligations under its
1982 contract with the Justice Department, and (2) if so, whether
INSLAW is entitled to compensation greater than that called for
by the contract. INSLAW asserts that the answer to both of those
inquiries is yes and that it is, therefore, entitled to the $6.8
million awarded it by the Bankruptcy Court and hundreds of
millions of dollars more for consequential damages. The
Department of Justice has maintained throughout the course of its
dealings with INSLAW that INSLAW has failed to demonstrate the
existence of any proprietary enhancements in its software and
that, even if INSLAW did use software containing proprietary
enhancements to satisfy its contractual obligations to the
government, it is not entitled to any compensation beyond that
provided for in the contract.

It should be noted from the outset that we considered this
issue one of the most difficult ones before us. There is no
dispute that, in the 12 years since the PROMIS contract was
executed, INSLAW has failed to obtain any kind of enforceable
judgment on any of its claims. INSLAW's failure in prosecuting
its claims comes despite extensive litigation over the years.
However, there is also no dispute that the Bankruptcy Court did

172

award INSLAW $6.8 million in damages based on the court's
conclusion that the Department had violated the automatic stay
provisions of the bankruptcy laws. In re Inslaw . 113 B.R. at
815-819. Although that decision was overturned by the U.S. Court
of Appeals for the D.C. Circuit on the ground that the
Department's actions did not constitute a violation of the
automatic stay, 932 F.2d at 1475, we were troubled by the factual
findings of the Bankruptcy Court.

After carefully reviewing all the relevant facts and the
various judicial opinions that have been issued in relation to
this dispute, we conclude that the Department of Justice should
not authorize the payment of any moneys to INSLAW or its
principals. There is no credible evidence that any Department of
Justice official in any way hindered INSLAW's ability to litigate
its claims against the Department. Moreover, we believe it is
clear that any claims INSLAW may have once had against the
government are now barred by the applicable statutes of
limitations. After reviewing all the issues raised by INSLAW, we
find that there is no basis warranting the waiver by the United
States of the statutory time bars to INSLAW's claims.

Furthermore, and most importantly, we do not believe that, even
if INSLAW's claims were timely, it would be entitled to any
additional compensation.

A. The History of INSLAW's Monetary Claims.

Under the Contract Disputes Act, 41 U.S.C. § 601 et seq. .

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all claims arising under a government contract must be submitted
to the appropriate government contract officer for resolution.

The contract officer's decision becomes final and conclusive
unless review is sought before the appropriate Board of Contract
Appeals within 90 days or before the U.S. court of Federal Claims
within one year. Appeals from either the Board of Contract
Appeals or the Claims Court lie solely with the U.S. Court of
Appeals for the Federal Circuit. These procedures provide the
exclusive jurisdiction for litigating claims against the United
States arising under a contract governed by the Contract Disputes
Act.

There are two groups of claims that INSLAW still maintains
entitle it to additional compensation. The first involves a
series of miscellaneous contractual claims ("DOTBCA Claims") . on
August 8, 1984, INSLAW submitted a letter to Peter Videnieks, the
Department's contracting officer, asserting claims for computer
center costs ($160,583) and target fees ($331,447). Mr.

Videnieks denied those claims on November 20, 1984, and INSLAW
filed a timely notice of appeal with the Department of
Transportation Board of Contract Appeals ("DOTBCA") in February,
1985. 55

On October 17, 1985, INSLAW submitted additional claims
totalling $4.1 million to Mr. Videnieks. These claims included a
$2.9 million claim for licensing fees allegedly due as a result

55 The DOTBCA has jurisdiction over government contract
claims against the Department of Justice.

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of the Department's use of INSLAW's proprietary enhancements
("Data Rights claim") and $1.2 million more in miscellaneous
claims. The contracting officer denied these claims in rulings
issued on February 21 and September 4, 1986. INSLAW appealed
these rulings, with one exception, to the DOTBCA. In its May
1986 notice of appeal of the February 21 ruling, INSLAW made
clear that it was "not appealing to this Board that portion of
the [Contracting Officer's] Final Decision on Data Rights." All
of the other October 1985 claims were appealed to the DOTBCA.

INSLAW failed to pursue vigorously the claims that it had
appealed to the DOTBCA. In October 1992, the DOTBCA, noting that
"it is clear that INSLAW is most anxious to avoid trial of the
issues," concluded that the "principal reason that, after all
these years, trial has not commenced, has been INSLAW's repeated
requests for suspension and continuance, including a Bankruptcy
Court suspension of Board proceedings at INSLAW's behest." 56

56 Despite this finding, INSLAW and the House Report both
maintain that Department of Justice attorneys were responsible
for delaying and obstructing the various suits between the
parties. For example, the House Report asserts that in 1990 the
Department requested the United States Court of Appeals for the
District of Columbia Circuit to consider the matter for the
Court's Appellate Mediation Program in bad faith in order "to
maintain the facade of working diligently to settle a tricky
contract dispute while working behind the scenes to sabotage it
and keep pressure on INSLAW by forcing it to expend additional
resources on legal support during the mediation process." House
Report 41-42.

The only support cited by the House Report for this
conclusion is the fact that an October 1, 1990, Washington Post
article quoted a Department spokesperson as disclosing publicly
that the Department had requested that the matter be considered
for mediation, and, following this disclosure, INSLAW elected to
withdraw from mediation. Although the reported disclosure did

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Later that same month, eight years after asserting its initial
claims, INSLAW submitted a motion to the DOTBCA seeking to
withdraw all of its claims, asserting that it could no longer
afford legal counsel to pursue the case. In an order dated
November 9, 1992, the DOTBCA granted INSLAW's motion and
dismissed the claims: "The requested dismissal in effect results
in a determination that no amounts are owing to INSLAW under its
claims... The appeals before the Board are hereby dismissed with
prejudice." Appeal of INSLAW. Inc. . Docket Nos. 1609, 1673,
1775, 1828, Opinion by Administrative Judge Robertory (DOTBCA

not violate any confidentiality rule of the Appellate Mediation
Program, the Program's administrator inquired of the parties
whether or not they wanted to continue with the mediation
following the publication of the article as the disclosure
violated the Program's goal of strict and total confidentiality.
INSLAW elected to withdraw from the mediation at that time.

Despite the House Report's conclusion that the breach in
confidentiality suggests bad faith on the part of Department
attorneys, there was no indication in any of the internal
Department documents we reviewed that suggest the Department
sought a mediated resolution to its dispute with INSLAW in
anything other than the utmost good faith. Furthermore, the fact
that the Department had sought mediation had been reported in
numerous articles more than six months earlier when the
Department first applied to the program. In fact, several of
those earlier articles reported that Mr. Hamilton denounced the
use of a mediator in the case. ("U.S. Seeks Mediator in Software
Lawsuit," The Washington Times . April 2, 1990, p. B5.) It is
difficult to understand how a re-publication of a fact that had
been published six months earlier — and which had been commented
on by Mr. Hamilton at that time — prejudiced INSLAW in such a
way as to "force INSLAW to withdraw from the program." There is
simply no evidence to support the House Report's extremely
critical interpretation of the events surrounding the mediation
effort. If anything, the evidence suggests that INSLAW
capitalized on an opportunity presented to it in October 1990 to
get out of a process that it never supported.

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NOV. 9, 1992). 57

Rather than pursuing an appeal to the DOTBCA on its Data
Rights Claims, INSLAW decided to pursue those claims as part of
its bankruptcy proceedings. In a novel and ultimately
unsuccessful litigation strategy, INSLAW filed an adversary
proceeding before the Bankruptcy Court alleging the Department of
Justice was willfully violating the automatic stay by its
continuing use of Enhanced PROMIS. In essence, INSLAW repackaged
its Data Rights Claims in the vernacular of a bankruptcy
proceeding. In 1988, Bankruptcy Judge Bason issued his opinion
in which he concluded, among other things, that (l) INSLAW's
claims were not based on contract and therefore were not
foreclosed by the exclusive jurisdiction of the Contract Disputes
Act, and (2) INSLAW had established a violation of the automatic
stay provisions of the Bankruptcy Act. United States v. Inslaw.
Inc. . 83 B.R. 89 (Bankr. D.D.C. 1988), rev 1 d . 932 F.2d 1467 (D.C.
Cir. 1991), cert, denied . 112 S.Ct. 913 (1992). Judge Bason
found that the Justice Department had acquired Enhanced PROMIS by
"fraud, trickery, and deceit." He awarded INSLAW $6.8 million in
damages for violations of the automatic stay.

Although Judge Bason's decision was affirmed by the District
Court, the U.S. Court of Appeals for the D.C. Circuit reversed
the decision on the grounds that the Department's actions had not

57 The Department of Justice had filed a number of
counterclaims against INSLAW before the DOTBCA. Those claims
were also dismissed by the DOTBCA in light of its determination
that the Department's claims were setoffs and did not seek
affirmative recoveries.

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violated the automatic stay and, therefore, the Bankruptcy Court
had no jurisdiction over INSLAW's Data Rights Claims. The court
of Appeals directed the Bankruptcy Court to vacate all of its
orders concerning the Department's alleged violations of the
automatic stay and to dismiss INSLAW's complaint against the
Department. 932 F.2d at 1475. INSLAW's petition for a writ of
certiorari was denied. 112 S.Ct. at 913.

B. INSLAW Is Barred From Asserting Any Additional Claims
Against The United States.

There are currently no claims pending before any judicial
tribunal between the United States and INSLAW. Furthermore, we
are convinced that INSLAW would be barred by the applicable
statutes of limitation from attempting to pursue any monetary
claims against the United States.

All of the DOTBCA claims were dismissed with prejudice by
the DOTBCA on November 9, 1992, pursuant to INSLAW's own motion
to dismiss. Under § 8(g) of the Contract Disputes Act, the
Board's decision "shall be final" unless the contractor files an
appeal with the U.S. Court of Appeals for the Federal Circuit
within 120 days of the Board's decision. 41 U.S.C. § 607(g).
INSLAW did not do so, thus rendering the DOTBCA's decision final.

INSLAW's Data Rights Claims are also time barred. The
contracting officer issued a decision with regard to those claims
on February 26, 1986. INSLAW never appealed that decision to an
appropriate forum, i.e., either the DOTBCA or the Court of
Federal Claims. In fact, in its notice of appeal to the DOTBCA,

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INSLAW specifically excluded its Data Rights Claims from its
appeal. Instead, INSLAW and its counsel decided to pursue that
claim using a novel theory in the bankruptcy court. As was
ultimately determined, the bankruptcy court did not have
jurisdiction to hear those claims. Any further pursuit of those
claims would appear to be foreclosed by § 6(b) of the Contract
Disputes Act, which provides: "The contracting officer's decision
on a claim shall be final and conclusive and not subject to
review by any forum, tribunal, or Government agency, unless an
appeal or suit is timely commenced as authorized by this
chapter." Accordingly, the contracting officer's 1986 decision
rejecting INSLAW's Data Rights Claims is final.

In a meeting with us and in various other forums, INSLAW has
asserted that its claims for the allegedly wrongful use by the
Department of Justice of its proprietary enhancements (i.e., its
Data Rights Claims) are not governed by the Contract Disputes Act
as they do not arise from the PROMIS contract. INSLAW contends
that these claims are better understood as grounded in the tort
of conversion. We do not think the recharacterization of its
claims as arising in tort will enable INSLAW to circumvent the
applicable statute of limitations. First, the Contract Disputes
Act applies to all claims that are essentially contractual in
nature even if they are styled differently. Our analysis of the
controlling case law leads us to conclude that INSLAW's claims
are "essentially contractual." See , e.g. . Spectrum Leasing Corp.
v. United States . 764 F.2d 891 (D.C. Cir. 1985). In fact, it is

179

worth noting that when INSLAW first asserted these Data Rights
Claims to the contracting officer in 1985 they were presented as
•'arising under the above-referenced [PROMIS] contract” and the
amount claimed was certified by Mr. Hamilton as a "contract
adjustment. "

Second, even in the unlikely case that the Contract Disputes
Act is not controlling, any claims that INSLAW would have under
the Federal Tort Claims Act would almost certainly be barred by
the FTCA's two-year statute of limitations. 28 U.S.C. § 2401.

C. The Circumstances Surrounding iNSLAW's Allegations Do
Not Warrant The Waiver By The United States Of The
Statutory Time Bars To INSLAW's Monetary Claims.

One of the principal missions of the Department of Justice
is to ensure that individuals are treated fairly and justly in
their dealings with the United States government. Accordingly,
the determination that any claims INSLAW may have against the
United States are barred by the applicable statutes of limitation
does not end our inquiry. We believe that in those exceptional
cases where not to do so would result in the commission of a
manifest injustice, the United States should be willing to
provide compensation to individuals even if the government is
protected by applicable time limitations. This is not one of
those situations.

First, INSLAW has had ample opportunity to fully litigate
its claims in the courts of this country. Over the years, INSLAW
has been represented by some of the finest attorneys and law
firms in the country who have vigorously and zealously

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represented INSLAW's interests. According to a document filed by
INSLAW with the DOTBCA in 1992, INSLAW had incurred over $6
million in legal fees by that time. We are aware that INSLAW and
its counsel made strategic litigating decisions that they may
want to take back today: they decided to let INSLAW's claims
before the DOTBCA languish for eight years, and they decided to
pursue a novel, untried theory in Bankruptcy Court rather than to
litigate the Data Rights Claims in the forum they knew was
proper. As noted by DOTBCA Judge Robert J. Robertory, these were
strategic decisions:

Inslaw elected to pursue the issue of ownership in
Promis in the Bankruptcy Court as a violation of the
automatic stay imposed by 11 U.S.C. § 362, which eventually
led to the Court of Appeals ruling (932 F.2d 1467, supra )
that such claim could not be maintained on that basis. In
so doing. Inslaw avoided the two tribunals (this Board and
the United States Claims Court) which unquestionably had
jurisdiction to determine the legal propriety of the Justice
Department's use of Promis. The reason for this election
was stated by one of Inslaw's counsel to be a fear that this
Board would apply the rationale of Bell Helicopter Textron .
ASBCA No. 21,192, 85-3 BCA 5 18,415 (1985), and hold that
the Data Rights clauses of the contract gave title to the
Promis enhancements to the Justice Department. In other
words, Inslaw and its counsel were of the opinion that under
the law of government contracts as expressed in Bell
Helicopter Textron , under the provable facts of this case
the Justice Department had sufficient ownership interest in
Promis to permit the uses which the Justice Department made
of it, without liability to Inslaw. This indicates that
Inslaw and its counsel were of the opinion that Inslaw's
position in the linchpin portion of the parties' dispute,
title to the Promis software (an issue which Inslaw's appeal
did not place before the Board) , might be without foundation
in law or fact.

The lack of success flowing from those decisions does not entitle
INSLAW to relief from the statutes of limitation.

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Furthermore, there is no credible evidence that any
Department of Justice official did anything to hinder or
frustrate INSLAW's access to the courts or its ability to present
fully its claims. Had INSLAW been denied such access and the
statute had subsequently run, we would have a very different
situation.

Second, we concur with the Special Counsel's conclusion that
"all of the actions taken by DOJ employees were done with a good
faith belief that they were in the best legitimate interests of
the government." (Bua Report 125.) The reason why this disp'ute
did not come to a close following INSLAW's unsuccessful efforts
in the courts and before the DOTBCA is that INSLAW has cloaked
its contract dispute with the government with allegations of
conspiracies, international intrigue and murder. By doing so,
INSLAW has been able to attract and sustain media interest in
what otherwise is nothing more than a government contracts
dispute. In the process, INSLAW and its principals have repeated
and broadcast unsubstantiated rumors apparently without any
concern for the reputations of those referred to in those rumors.
Individuals previously of stellar reputation and unquestioned
integrity have had to live under clouds created by INSLAW. Those
clouds have almost all been created based on nothing more than
the alleged statements of "anonymous sources." As detailed
throughout this and the Special Counsel's report, we have found
virtually no credible evidence supporting INSLAW's conspiracy
allegations. We believe INSLAW should not be rewarded for its

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ability to keep its story alive by ruining the reputations of
innocent individuals.

And third, after carefully reviewing the record, we do not
believe INSLAW is entitled as a matter of law to additional
compensation for the use of its PROMIS software. We have studied
the opinions of the bankruptcy court, some relevant portions of
the bankruptcy court record, the analysis of the Special Counsel
and the views of INSLAW as reflected in its written submissions
and in various meetings with its principals. Based on that
review, we concur with the analysis and conclusions of the
Special counsel regarding the rights of the parties under the
contract and the propriety of the government's conduct under the
contract. (Bua Report 15-38, 124-140, 147-150, 250-255, 261-263.)
Further, we believe the current use of INSLAW's PROMIS software
by the Department in the Executive Office of United States
Attorneys and in U.S. Attorneys' offices around the country is
permitted under Modification 12 and other provisions of the
contract. 58 Since we were unable to identify any credible
evidence that the Department has distributed Enhanced PROMIS
beyond those offices, we do not believe INSLAW is entitled to

58 Modification 12 provides:

The Government shall limit and restrict the
dissemination of the said PROMIS computer software to the
Executive Office for United States Attorneys, and to the 94
United States Attorneys' Offices covered by the contract,
and, under no circumstances shall the Government permit
dissemination of such software beyond those designated
offices pending the resolution of the issues extant between
the Contractor and the • Government under the terms and
conditions of Contract No. JVUSA-82-C-0074 .

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additional compensation.

We believe it important to note that the House Report is
erroneous in its repeated assertions that then-Deputy Attorney
General Arnold Burns acknowledged to Office of Professional
Responsibility investigators that "the Department had already
determined [in 1986] that INSLAW's claim was probably justified
and that the Department would lose in court." House Report 111;
see also House Report 7, 33-34, 86. In fact, our review
uncovered no evidence that Department officials took any
positions during the litigation in bad faith or believed that
IN SLAW deserved to recover moneys in addition to those provided
for under the contract.

The House Report misinterprets testimony given by Mr. Burns
on March 30, 1988, to OPR investigators by totally ignoring the
context in which that testimony was given. As noted in the
dissenting statement to the House Report, once the context of Mr.
Burns' statement that Department lawyers were "satisfied that
INSLAW could sustain the claim in court" is taken into account,
it is clear that he was referring to the strength of INSLAW's
defense to a particular crossclaim bv the Department and not to
the merits of INSLAW's affirmative claims against the government.
See Dissenting views of Hon. Hamilton Fish, Jr. , et al. , House
Report 116-117. The text of the relevant portion of Mr. Burns'
testimony follows:

Because as it was explained to me, the PROMIS system
had been developed by INSLAW pursuant to a grant by the
United States government, pursuant to a grant by us, the
Department of Justice, the United States Government to

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INSLAW of a big sock of dough. And they, in effect, were
developing this for the Department of Justice with
Department of Justice money, working hand-in-glove as we
sometimes do untold [sic] with other vendors or contractors.

Under circumstances which, it struck me as a lawyer at
the time, hearing this as a new room [sic], as a very
peculiar notion. It struck me that in those circumstances,
that the proprietary rights to this belonged to the
Department of Justice and that if anything, the tables were
turned the other way and that INSLAW should pay the
Department of Justice royalties to the extent they were
vending or selling or leasing or whatever they do to
outsiders, to third parties.

Now I should also tell you that in talking to my
lawyers, I became sort of a little aggressive on this issue,
as a lawyer, aggressing an issue, not aggressing people but
addressing and aggressing an issue. And I wanted to know,
as a lawyer, why we didn't make a claim against INSLAW for
the royalties on the theory that we were the proprietary
owners. And I got an answer.

And the answer that I got, which I wasn't terribly
happy with but which I accepted, was that there had been a
series of old correspondence and back and forthing and
stuff, that in all of that, our lawyers were satisfied that
INSLAW could sustain the claim in court, that we had waived
those rights, not that I was wrong that we didn't have them
but that somebody in the Department of Justice, in a letter
or letters, as I say in this back and forthing, had, in
effect, waived those rights.

(In the Matter of: Office of Professional Responsibility
Investigation No. 86-0170, Interview of Arnold I. Burns, 11-12.)
when read in context, Mr. Burns' statement fails, totally and
quite clearly, to "raise the specter that the Department actions
taken against INSLAW in this matter represent an abuse of power
of shameful proportions." The statement is indicative of neither
duplicity nor any other impropriety.

We are aware that many of these conclusions are at odds with
some conclusions reached by Judge Bason after trial in his court.
We cannot explain why Judge Bason reached such very different

185

conclusions from those that we and the Special Counsel have
reached. 59 However, after carefully reviewing Judge Bason's
opinions, it is clear that the decisions rest in large part on
Judge Bason's determinations as to the credibility of the
witnesses who testified during trial. The following was Judge
Bason's first finding regarding the credibility of the witnesses
that appeared before him:

The testimony of William Hamilton was accurate in all
or almost all respects, even taking into account the natural
human tendency to emphasize those things favorable to one's
own cause. Mr. Hamilton was an impressive witness with an
exceptionally good memory and an extraordinary ability -to
remember with precision details of events that occurred
years ago.

In re Inslaw . 83 B.R. at 156. He went on to find that virtually
none of the testimony given by Department of Justice employees or
by others (including INSLAW employees) supporting the
Department's position was credible. Id. at 156-158. The
importance of those credibility determinations is apparent from a
close reading of the decision as the testimony of Mr. Hamilton
and a few other INSLAW officials appears to be the only support
for the vast majority of Judge Bason's findings.

We disagree with Judge Bason's credibility determinations.

As detailed throughout the Special Counsel's report and this
report, the information provided to us by Mr. Hamilton has often
been unreliable and is always self-serving. Numerous witnesses

59 The House Committee Report reached the same conclusions as
Judge Bason regarding the underlying contract dispute between
INSLAW and the government. However, it appears that the report
relies heavily on the findings of Judge Bason in reaching those
conclusions.

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have denied making statements attributed to them by Mr. Hamilton.

Others have claimed that Mr. Hamilton badly mischaracterized

their comments in order to make them fit into his conspiracy

theories. These problems are not unique to our efforts. The

House Committee report noted:

Other witnesses directly contradicted the statements
attributed to them by the Hamiltons and were clearly
distressed that their names had been drawn into the
web of the INSLAW conspiracy theory.

(House Report 50.) The Special Counsel concluded:

We cannot fail to note also the degree to which William
Hamilton’s statements and assertions do not withstand -
scrutiny. We repeatedly encountered witnesses who, in a
very credible way, denied making the statements attributed
to them by Hamilton. The witnesses who contradicted
Hamilton were both friend and foe of INSLAW, and we could
not explain the constant contradictions as simply the
efforts of Hamilton's enemies.

(Bua Report 266.) According to the DOTBCA , even INSLAW's counsel
were concerned about Mr. Hamilton's credibility:

The record contains statements by one of INSLAW's
various attorneys indicating that Mr. Hamilton may be given
to exaggeration. There was testimony in the Bankruptcy
Court on December 7, 1988 by appellant's counsel that Mr.
Hamilton's credibility was a real problem and would be a key
issue in the case.

After spending a substantial period of time reviewing Mr.
Hamilton's statements and allegations, we believe that he is not
a credible source of information. Furthermore, he appears
willing to repeat and publish any rumor or conjecture that he
hears without regard to the truth of those rumors or the effect
his statements may have on the reputations of innocent
individuals.

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